December Report

Global equity markets declined in December, with market leadership shifting during the month. Central bank actions and policy signals played an important role in shaping market outcomes, setting the tone for sector and regional performance.

Financials and Materials were the strongest-performing sectors during the month. These areas benefited as central banks signalled a more constructive outlook, with the European Central Bank raising its economic growth forecasts and reporting low inflation, while the US Federal Reserve and the Bank of England cut interest rates. In contrast, traditionally defensive sectors such as Utilities and Real Estate lagged as investor preference shifted away from more cautious positioning.

At a regional level, Europe was the strongest-performing market, rising over 3.5% as confidence around economic stabilisation improved. The United States was the weakest region, weighed down by weakness in software stocks. Shares of Oracle declined after the company reported disappointing cloud sales and highlighted a sharp increase in spending related to artificial intelligence, which weighed on broader sentiment across the technology sector.

Overall, December was characterised by a shift in market leadership, with performance driven more by sector and regional exposures than by changes in underlying business fundamentals.

Portfolio Commentary

December proved a more challenging month for PIA, as market conditions were less supportive of the Portfolio’s quality-focused positioning. Despite this backdrop, exposure to selected Health Care and Information Technology holdings provided some support.

In Health Care, performance was supported by continued strength across several holdings. In Europe, Roche, the Swiss pharmaceutical company, performed well following interim results showing that its breast cancer treatment kept early-stage patients cancer-free for longer than the current standard of care. The update reinforced confidence in the company’s innovation pipeline and its ability to deliver resilient long-term growth. In the US, Vertex Pharmaceuticals also contributed positively, benefiting from ongoing strong adoption of its cystic fibrosis therapies.

Within Information Technology, stock selection was supportive during the month. An overweight position in TSMC, the world’s leading semiconductor manufacturer, contributed positively, while the Portfolio’s lack of exposure to Apple, whose shares declined, further aided relative outcomes.

During the month, the Portfolio exited its position in Synopsys, a US chip-design software developer. The decision reflected concerns around the company’s acquisition of Ansys, with management guidance assuming strong growth outcomes that left limited room for error given the valuation of the shares. The sale was consistent with the team’s disciplined approach to managing risk and allocating capital.

Elsewhere, Communication Services detracted from performance. Shares of Netflix declined as investors became concerned about the potential for a bidding war and extended regulatory scrutiny related to its proposed acquisition of Warner Bros Discovery.

Overall, December’s outcome reflected shifts in market leadership rather than any deterioration in the underlying fundamentals of Portfolio holdings. The Portfolio remains well diversified, and the team continues to focus on high-quality businesses with strong balance sheets, durable competitive advantages and clear long-term growth drivers.