VOLVER


Quarterly Letter

Third Quarter 2025

Quarterly letter

  • Third Quarter 2025

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Dear investor,

Rarely in the history of the markets has there been such a contrast between perception and reality. Just six months ago, the world’s major stock markets suffered declines of around 20% following the announcement of the new US trade policy. Within weeks, they went from post-election euphoria to tariff panic, pricing in an imminent spike in inflation and recession. However, those same indices ended the third quarter of the year trading at unprecedented highs. Faced with this extreme situation, in this editorial we want to offer a calmer and more balanced view of reality.

Over the last few months, the noise coming from the US has been incessant. However, the market’s worst fears dissipated as the US government signed agreements with its main trading partners, with the exception of China. In all these cases, the terms have been substantially more moderate than the initial, abusive proposals. Although they continue to pose an obstacle to international trade, their impact will be much less than initially estimated. This explains much of the strong performance of equities throughout the quarter.

Looking ahead to the coming months, investors in the US will focus their attention on three different areas. The most significant will be the impact of the major tax reform approved last July. This confirms the tax cuts introduced in 2017 and adds substantial tax exemptions for businesses and families. In addition, the Federal Reserve will receive its share of attention after lowering interest rates in response to a cooling labour market. Such cuts, when made at times of record highs for equities, have traditionally led to additional gains. Finally, negotiations have recently begun to raise the spending ceiling. This issue always causes a lot of chatter in the media. However, over the last 20 years, the spending ceiling has been adjusted 21 times without hindering the positive performance of equities.

In Europe, the situation has also fluctuated between optimism and concern. The macroeconomic data points to an acceleration in economic growth thanks to the boost from fiscal policy. Furthermore, inflation appears to be under control and no interest rate rises are expected from the European Central Bank. As we explained in previous newsletters, Europe seems willing to take important steps in the right direction. But it is not enough simply to announce these steps; they must be implemented. And, in this regard, doubts seem to be growing. The political situation in France, its high level of debt, which has led to a downgrade of its credit rating, and the difficult balance of the governing coalition in Germany will continue to make alarming headlines in the coming months.

In general terms, despite the background noise, our interpretation of the environment remains unchanged. Economic activity remains stable and private debt remains at very low levels. No inflationary pressures capable of unexpectedly altering monetary policy are foreseen by us. And we believe that US tax reform and the European investment plan should serve as additional tailwinds for the economy and markets. On the downside, the framework for a trade agreement between the US and China has yet to be established. Meanwhile, in Europe, the political agenda will continue to be marked by instability in France and Germany. In summary, the market will continue to have reasons to see the glass as half full and, at the same time, half empty.

This dual interpretation has led global equities into a paradoxical situation. On the one hand, the main indices have returned to historic highs. At the same time, most companies remain at significantly lower levels. The same applies to valuation multiples, where size differentials remain highly significant. This dispersion has meant that, after the stock markets reached historic highs, there is now a market full of good investment ideas. The sources of uncertainty we have highlighted and the episodes of volatility they may cause only serve to increase the opportunities available to patient, long-term investors like us. In the newsletters below, we provide examples from sectors including manufacturing, real estate, technology, and healthcare.

We are now entering the final stretch of what has been a positive year for the markets and our funds. Bestinfond and Bestinver Internacional, the company’s flagship funds, continue to perform well, accumulating gains of 8.3% and 6.5% respectively. We would also like to highlight the strong performance of Bestinver Bolsa and Bestinver Latam, with gains of 40.4% and 25.1% during the current financial year. Finally, in fixed income, Bestinver Renta’s 3.0% return reflects the excellent work of our team in today’s complex environment. Overall, we are satisfied with the performance of our portfolios and their potential for the coming years.

Before concluding this editorial, I am delighted to announce that we now have 48,000 investors in our funds. All of us who are part of this company take pride in safeguarding your capital every day. Thank you on behalf of the entire BESTINVER team.

I bid you farewell, thanking you once again for the trust you have placed in us.

Yours sincerely,

Mark Giacopazzi.

 

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