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Gold continues to shine

Gold’s rally has extended aggressively into 2026, climbing from around US$2 000/oz at the end of 2023 to record highs above US$5 400/oz last week before retreating back towards US$5 000/oz at the time of writing. By most traditional valuation metrics, gold now screens as extremely expensive. However, assuming a simple reversion to historical norms risks missing what appears to be a genuine structural shift in demand.

Following Russia’s invasion of Ukraine and the subsequent weaponisation of the US dollar, emerging market central banks have materially increased their allocation to gold as part of foreign reserve diversification. At the same time, rapidly rising debt levels across developed markets are increasingly calling into question the long-term credibility of major reserve currencies.

The 2025 rally was also supported by softening interest rate expectations – typically a tailwind for non-yielding assets like gold. More recently, renewed geopolitical tensions, including developments related to Venezuela and Greenland, have helped push the metal even higher.

We first added gold to our multi-asset portfolios in 2020 and later incorporated gold mining shares into our equity strategies in 2022. While the long-term structural case remains compelling, we have started to trim positions to manage short-term overbought conditions and overall portfolio risk.

Silver takes the spotlight

Investor interest in precious metals broadened through 2025, with silver and platinum drawing increased attention. Silver, in particular, has outperformed dramatically – rising almost fourfold over the past year to trade above US$120/oz last week, before retreating to US$91/oz at the time of writing.

Unlike gold, silver has more recently behaved mainly as an industrial metal with residual monetary traits. It plays a vital role in solar panels, electrification and broader decarbonisation trends, linking its price more closely to global industrial activity and capital spending cycles.

Historically, silver has maintained a mean-reverting relationship with gold, with the gold-to-silver ratio averaging around 70 times over the past three decades. Last week the ratio bottomed at 46 times while it recovered to roughly 56 times at the time of writing – still suggesting silver is expensive relative to gold by historical standards.

From a supply perspective, assessing marginal production costs is complicated by the fact that approximately 70% of silver is produced as a by-product of copper, lead, zinc or gold mining. For the remaining 30% mined primarily for silver, production costs are typically estimated in the US$20–30/oz range, implying that current prices are well above incentive levels.

We hold no direct exposure to silver in our portfolios. However, several of our mining holdings benefit from silver by-products, most notably Glencore. We estimate that every US$10/oz increase in the silver price lifts Glencore’s 2026 earnings by around 1%.

Discretionary retail still stuck in low gear

From the limited festive season trading updates released so far, a few themes have emerged. High base effects from the prior year’s two-pot withdrawals and elevated promotional activity are weighing on margins. Although inflation has eased meaningfully and interest rate cuts have begun, these have not been enough to revive discretionary spending. A meaningful pickup in real economic growth remains essential for a sustained recovery.

At the time of writing, Clicks, Truworths and Mr Price have reported. Clicks once again demonstrated the resilience of its model – supported by a strong front-shop contribution, private label penetration and supplier-funded promotions that helped protect margins. It remains the only retailer to report positive volume growth over the ‘golden quarter’.

In contrast, both cash-led value (Mr Price) and credit-driven premium (Truworths) apparel retailers reported volume declines. While base effects explain part of the softness, demand across apparel remains highly promotion-sensitive, with broad-based discounting still necessary to drive sales.

High unemployment, lacklustre real disposable income growth and a diversion of discretionary spend towards online betting continue to act as structural headwinds in the sector.

TSMC signals continued strength in AI cycle

Taiwan Semiconductor Manufacturing Company’s (TSMC) latest results offer one of the clearest windows into the current state of the AI investment cycle. End-user demand for AI remains robust, while the semiconductor industry’s capacity to produce ever more complex chips at scale continues to be a binding constraint.

Reflecting this backdrop, TSMC has raised its 2026 capital expenditure budget by more than 30% to over US$50 billion, with further increases signalled for subsequent years. This expansion particularly benefits equipment suppliers such as Applied Materials, which provides essential tools used in TSMC’s fabrication plants and is held in some of our portfolios.

While we believe AI demand is real and adoption is accelerating, history reminds us that major technology buildouts often overshoot in their early phases before normalising. With valuation multiples expanding across segments of the market, we remain alert to the risk of corrections and will continue to take profits where enthusiasm appears excessive.

That said, near-term fundamentals remain compelling. Demand still outpaces supply, and we believe it’s entirely feasible that AI-related equities could rally into a bubble, reminiscent of the late-1990s tech cycle. On this basis, we remain selectively positioned across the semiconductor value chain, balancing participation in the AI cycle with disciplined risk management.

BAT: SA closure more pragmatic than alarming

The decision of British American Tobacco (BAT) to close its South African manufacturing facility is a clear negative for the country – impacting jobs, industrial capacity and investor confidence. It underscores broader structural challenges in South Africa’s operating environment, including mounting regulatory pressure, the continued rise of illicit trade and escalating input costs. The loss of another multinational production base reinforces concerns around de-industrialisation and South Africa’s shrinking role as a regional manufacturing hub.

From BAT’s perspective, however, the move is more pragmatic than alarming. The company has been steadily simplifying its global supply chain, optimising costs and shifting capital towards higher-return categories such as next-gen products (vapour, heated tobacco).

South Africa contributes a relatively small share of group volumes and earnings, making the closure largely immaterial to BAT’s overall profitability or strategic outlook. In fact, the shift may enhance operational efficiency through regional consolidation and imports.

Ultimately, the cost is far greater for South Africa than for BAT, highlighting the divergence between national economic priorities and corporate portfolio optimisation.

Richemont: sales sparkle, but margins in focus

Richemont posted a strong trading update for the three months to the end of December 2025, maintaining solid momentum through the key festive period. Group sales rose 11% at constant exchange rates to €6.4 billion, taking nine-month revenue to €17 billion, up 10% constant – an impressive result given tough double-digit comparatives.

Growth was broad-based and led once again by jewellery maisons, up 14%, with Cartier and Van Cleef & Arpels driving another standout festive season. Specialist watchmakers recorded a second consecutive positive quarter (+7%), suggesting a degree of stabilisation in that segment.

Regionally, all major markets delivered growth. The Americas (+14%), Japan (+17%) and the Middle East (+20%) helped offset lingering softness in China. Retail remained the engine of resilience, up 12% at constant rates and now accounting for 72% of group sales. The balance sheet remains exceptionally strong, with €7.6 billion in net cash.

Despite the upbeat top-line performance, investor attention remains fixed on margin risk – driven by foreign exchange volatility, gold-price inflation and ongoing cost pressures. The key question is how much of this sales momentum will ultimately flow through to operating margins. With continued investment through cost headwinds, the group’s full-year results in May will offer more clarity on profitability and cash conversion.

ICE: positioned for a volatility rebound

As active managers, we embrace volatility, as it can create opportunities to invest in high-quality companies at more reasonable valuations, or to reduce or exit positions that are trading above our assessment of intrinsic value. In line with this valuation discipline, we made several changes to our global high-quality strategy during the fourth quarter of 2025.

One of these was Intercontinental Exchange (ICE), where we added to our holding after a period of underperformance. Volatility across asset classes tends to support ICE’s trading profits, and while it declined last year, we believe a potential pickup in 2026 could boost ICE’s trading-related income.

We also expect the mortgage technology business to recover from depressed levels, which would help ICE deliver on the 50% of its business that generates annuity-type, inflation-protected income.

Since ICE’s inclusion in the portfolio in May 2023, the stock has delivered roughly 70% in total shareholder return in US dollar terms (equivalent to around 22% annualised). We continue to view the company as a high-quality compounder with exposure to both cyclical upside and stable recurring income.

Yum! Brands: back on the menu

Yum! Brands is one of the longest-standing holdings in the global high-quality strategy, having been held since inception. Over the full holding period, it has delivered strong compound returns of 11.3% in US dollar terms.

We reduced our position in mid-March last year following strong share price performance, as a weaker US dollar provided a boost to Yum’s international revenue stream. Since then, returns have lagged, with the stock underperforming the market by around 30%. The resulting improvement in valuation gave us the opportunity to add to this high-quality franchise business.

A recent investor day update outlined medium-term growth targets that align with our forecasts, as the company continues to build on the success of KFC and Taco Bell, while simultaneously executing the exit of Pizza Hut.

IHG and Hilton: high-quality hotel holdings

We first invested in Intercontinental Hotels Group (IHG) in 2019, and the stock has since then delivered a compound return of 14% in US dollar terms. We continue to view IHG as a high-quality business with strong margin expansion potential. We forecast that operating profit margins will expand by close to 5% over the next four years, driving an expected 40–50% increase in profits.

The reopening of the US government in the fourth quarter of last year, along with continued resilience in the US economy, bodes well for our hotel holdings – we also own Hilton. IHG’s operating profit margins place it in the same category as other portfolio names such as CME Group and Visa, with pre-tax margins exceeding 60%, a hallmark of exceptionally profitable businesses.

We expect both IHG and Hilton to retire up to 12% of their issued share capital over the next five years, driven by robust free cash flow generation being used to fund share buyback programmes, boosting earnings per share in the process.