A strong half of outperformance by TPP. A review of the first half of 2025.

TPP has clearly outperformed once again

The First Half of 2025 has kept us busy.

In the first 6 months of 2025, we have witnessed one of the most dramatic shifts in global investment patterns in years. Three key forces have fundamentally altered the investment landscape: escalating trade tariffs, widespread downgrades to earnings forecasts, and heightened geopolitical tensions. These factors have created substantial market uncertainty, triggering what can only be described as a major asset allocation reset.

Perhaps the most striking development has been the stark performance divergence between European and US markets. Capital has moved from the largest US companies and been dispersed among the major European economies.

Past performance may not be indicative of future results.

The fundamental economic picture for the US has deteriorated significantly. The World Bank has cut its 2025 US GDP forecast by 0.9 percentage points to just 1.4%, half of last year's growth rate. Adding to these concerns, the US lost its triple-A credit rating in May following a downgrade by Moody's, while the country's debt position continues to balloon. US equity valuations remain elevated at approximately 22 times next 12 months' forecast earnings, not far from the 23.1 times peak reached in 2020. This combination of high valuations, deteriorating fundamentals, and mounting debt concerns has further diminished investor appetite for US assets.

Europe has emerged as a primary beneficiary of this global reallocation. The region's cheaper valuations have acted as a magnet for investors fleeing US markets. Germany's DAX has experienced a similar re-rating to the UK market, though, unlike Germany, the UK remains historically cheap. Trump's signals about scaling back US military protection for Europe have also driven increased defence spending across NATO members, benefiting European weapons manufacturers and defence contractors.

British investors have enjoyed returns more than four times greater than their American counterparts, with the FTSE 100 delivering an impressive 9.6% return including dividends, while the S&P 500 managed just 2.1%. This reversal represents a significant challenge for President Trump, who previously viewed stock market performance as a key measure of his administration’s success. Unlike his first term, the US market has lagged behind many global peers, prompting investors to abandon the dollar and withdraw capital from American stocks in favour of European and other international markets.

Several factors have contributed to the UK's remarkable performance. The market's historically cheap valuation relative to the US has become increasingly attractive as investors seek value opportunities. Currently trading at 12.5 times next 12 months' forecast earnings, the FTSE 100 remains well below its 2015-2018 range of 14-16 times, despite rising from the 8.7 times seen in 2022. The UK market's composition has proven particularly appealing during uncertain times, with defensive sectors dominating the FTSE 100, including tobacco companies like British American Tobacco and telecommunications firms such as BT, which have delivered steady earnings regardless of global turbulence.

The defence sector has emerged as another bright spot, with increased government spending on cybersecurity and military capabilities driving interest in British defence contractors. The financial sector, including banks and insurers, has also attracted investors seeking generous dividend yields. Precious metals have provided additional momentum, with gold reaching record highs in April. UK-listed miners like Fresnillo have capitalised on this trend, delivering spectacular returns of 126% for investors this year. The UK also benefits from having an established trade agreement with the US, further enhancing its attraction to both domestic and foreign investors amid Trump's tariff chaos.

The US market faces multiple headwinds that explain its underperformance. Trump's tariff policies, while intended to encourage domestic consumption, have instead increased costs for American consumers and businesses. This has led to a 4.9% reduction in S&P 500 consensus earnings forecasts as analysts factor in higher costs and reduced demand. Corporate earnings updates have grown increasingly cautious, with Best Buy recently cutting its profit outlook due to tariff impacts, while Target disappointed with weak earnings and reduced forward guidance amid declining consumer spending. Even everyday consumer goods companies are struggling, with cereal manufacturer WK Kellogg warning it may no longer achieve adjusted profit growth this year.

The once-mighty Magnificent Seven tech stocks have lost their lustre, with four of the seven - Alphabet, Amazon, Apple, and Tesla - delivering negative returns. This represents a significant shift from 2023 and 2024, when these companies effectively drove the entire US market higher. These stocks have been left behind by a 20% rally in Chinese rivals and a surge in European weapons makers, the latter driven by Trump's signals that the US will scale back Europe's military protection, forcing NATO members to rearm.

Gold has experienced its biggest rise since the early 1970s, climbing 25% as investors seek safe havens amid currency instability. This precious metals rally has marked a return to patterns not seen since the end of the bullion-linked Bretton Woods System.

Fixed income markets have experienced considerable turbulence, with 30-year Treasury yields surging past 5.1% in May - their highest level since 2007 - before retreating to 4.8%. This volatility has made US debt unattractive to many international investors, while Switzerland has taken its interest rates back down to zero. Germany's historic plan to revamp its self-imposed debt brake to allow higher defence spending initially interested the global bond market, though long-term US debt concerns and record-high Japanese borrowing costs have driven most moves since.

The dollar's decline has been particularly dramatic, falling over 10% in its biggest first-half drop since the early 1970s when free-floating currencies began. This decline reflects concerns about Trump's "Big Beautiful" fiscal bill, which is expected to maintain the US deficit at 6-7% while the national debt continues ballooning past $36.2 trillion. The dollar's weakness has benefited other major currencies significantly, with the euro rising 12.5%, Japan's yen gaining nearly 8%, and the Swiss franc climbing 13.5%. Even the Russian rouble has surged 40%, aided by Trump's re-engagement with President Putin, though it remains heavily restricted by Western sanctions.

Meanwhile, at the bottom of the currency pile are familiar names like Argentina's peso and Turkey's lira, the latter down nearly 11% following the detention of Turkish President Erdogan's main political rival in March.

Cryptocurrency markets have remained characteristically volatile, with Bitcoin initially rising 20% following Trump's inauguration, then plummeting 30% when his cryptocurrency reserve plans failed to impress, before gradually recovering over the past three months. Oil markets have also experienced significant swings, dropping 30% to below $60 per barrel in April amid global recession fears, then briefly soaring above $80 when Israel and the US conducted military strikes on Iran.

The first half of 2025 has demonstrated that the era of automatic US market outperformance may be ending. The combination of trade policy uncertainty, elevated valuations, deteriorating economic fundamentals, and mounting fiscal concerns has created a perfect storm for American assets. Meanwhile, markets with defensive characteristics, reasonable valuations, and exposure to beneficiary sectors like defence have thrived.

The UK market's performance exemplifies this trend, offering investors both value and defensive qualities in an increasingly uncertain world. As we move into the second half of 2025, the key question remains whether these trends will persist or if American markets can regain their footing. For now, the great asset allocation reset continues, with investors increasingly looking beyond US borders for opportunities and returns.

It has been a fantastic start to 2025 for TPP and our clients. Although a few of the indices have underperformed, our trading strategies are all on track for another benchmark-beating year.

It’s impossible to know which index will perform from one year to the next. Market commentators will tend to tell you what’s happened, rather than what will happen. They will also usually back trends and say they ‘could’ continue, but that fact is, economists and market predictors are famously inaccurate, and more often than not, just wrong.

At TPP, we trade multiple strategies and multiple indices. By selecting a few, you should always have an absolute portfolio designed to perform in all market conditions.

Here are the trading strategies that are topping the table so far in 2025.

As you can see, a number of our strategies, and therefore a number of our client portfolios, are enjoying 2025. Small increases in yield can make large differences over time as your returns compound. Don’t just shrug off underperformance; there’s no excuse for it now TPP is here.

TPP isn’t your typical wealth manager.

We don’t do stale investment strategies, fat fees, or lazy “buy, hold and hope” nonsense like most of our competitors.

While many are busy predicting from the past, we build dynamic, diversified portfolios designed to adapt, because markets don’t stand still, and neither should your money.

We believe in smart automation, constant risk control, and a clear focus: beating benchmarks, protecting capital, and giving clients the confidence that no matter what hits the headlines, their portfolio is working for them, not the other way around.

When the world changes, we change with it. That’s why so many investors are ditching the old-school middlemen and moving to a smarter, more transparent way to grow wealth.

The old guard is stale. TPP is the edge. Join the investment revolution. We are here to work for you, so please get in touch and let us discuss how we can help.

Disclaimer: The views expressed in this article are the author’s own and should not be considered to render any legal, business or financial advice. Opinions and estimates offered constitute our judgment and are subject to change without notice, as are statements of financial market trends, which are based on current market conditions.

This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only.

Past performance may not be indicative of future results. Therefore, you should not assume that the future performance of any specific investment or investment strategy will be profitable or equal to the corresponding past performance.

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