Fund Return 2025 - 2026

Fund return to 31 July 2025

Investment Commentary

Provided by Mercer - CERS Investment Adviser

Market Developments

Global equities had a strong month, led by emerging markets and US stocks. Non-US developed had low single digit positive returns and underperformed emerging market and US equities. Global small caps slightly outperformed large caps while growth outperformed value as measured by the Russell 3000.

Bond markets had positive performance as yields in most regions fell, including in the US. Concerns over the growing budget deficit resulting from the Big Beautiful Bill were shrugged off by investors both this month and on a year-to-date basis.

Market sentiment was generally positive throughout the month as investors cheered the potential for higher growth resulting from President Trump’s tax cuts and deregulation being enshrined into law while downside risks fell. Another trade truce with China was agreed to, the US-UK trade deal was signed and the Trump administration hinted at good progress on trade negotiations with other countries, including Canada after agreeing to rescind its digital service tax to allow trade talks to continue. Geopolitical risk in the Middle East was addressed by a successful Israeli-led air campaign to dismantle the rising threat of Iran’s ballistic missile and nuclear weapons program, which ended with US airstrikes on the remaining facilities. While the month was extremely eventful, markets concluded that events turned for the better on many fronts, which supported strong returns across the board and volatility returned to record lows.

The economic data was mixed but generally positive for the month. The unemployment rate remained at 4.2% in May. Nonfarm payrolls came in slightly below expectations, indicating a continued rebalancing of the labor market. US consumer sentiment measured by the University of Michigan Survey bounced up from near all-time lows in May. Global PMIs generally increased or were largely unchanged. This paints an overall picture of a stable or moderately slowing economy rather than an imminent recession.

Headline inflation in the US rose 2.4% year-over-year in May, a higher reading than April but below expectations and increasingly close to target. However, core prices referenced by the Fed remained elevated at 2.7% over the trailing year. Headline inflation in other developed markets decreased to 3.4% in the UK, 1.9% in the Eurozone, and 3.5% in Japan. In a split vote, the Bank of England held rates steady, along with the Fed, BoC, BoJ, and PBOC. The ECB and Swiss National Bank both cut rates.

The US dollar weakened further in June. Real asset returns underperformed broad equities. Oil prices spiked initially from the airstrikes on Iran but quickly fell again later in the month after the ceasefire set in, even if oil ended the month higher. Gold ended the month slightly lower as demand for safe havens was limited in this risk-on month.

Outlook

A multi-polar world is on the horizon with a more volatile geopolitical backdrop impacting the security of everything. Trade patterns and supply chains are shifting along geopolitical fault lines as national security now competes with economic efficiency, and tariffs have become a means of diplomacy. Free trade remains controversial in developed countries, especially in the US, as its adverse impacts in developed countries are more easily seen than offsetting benefits. Trade imbalances are at the forefront, which the second Trump administration is determined to address through tariffs and a crackdown on currency manipulation and other practices that are seen as putting the US at a disadvantage. Investors need to be prepared for rapid changes in the current world order that may create short-term volatility but also have an intermediate impact on countries and companies.

In such geopolitical landscape, we see some trends ahead:

Energy independence or at least resilience will be key, with different regions prioritizing different energy sources that help achieve that.

Companies are shifting from just in time to just in case, building in redundancies and diversifying their supply chains, due to their own experience during 2020 but also to align themselves with national policy priorities.

A shift towards US focused on issues that are in closer proximity and directly related to its immediate national interest. The whole of Europe will likely be following the lead of countries like Poland in taking a more active role in its own defense by creating a bulwark against Russia. China will continue to assert its dominance across Asia and much of the Global South. This shift will likely lead to elevated geopolitical unpredictability for the decade ahead and elevated defense spending across the globe.

 Investment Update - June 2025 - received and updated 17.07.2025.

Notes

• Scheme Year to date performance is the period from 1 June 2025 to the most recent month shown.
• Performance shown is net of annual management charge.
• The investment choices offered by the Trustee will be regularly reviewed and may be varied from time to time.
• Before you choose a fund we recommend that you speak to a financial adviser. 
• If you require further information please contact the CIRT Team at [email protected]