Capturing US earnings

Counterpoint October 2025

Note: Any reference to portfolio positioning relates to our flagship core discretionary portfolios. Clients invested in other strategies, or in bespoke and advisory portfolios, should consult their Client Advisor.

What you need to know

  • We’re increasing our US equity exposure to a small overweight, funded by selling developed market minimum-volatility equities. Why? Because stronger US economic growth, solid earnings, policy stimulus and the AI investment cycle all have the potential to support near-term US equity performance.

  • To offset any dollar weakness, we’re buying ‘hedged’ US equities, which take out currency effects. And to partly cushion the impact of volatility, we also use ‘insurance’ strategies where permitted, investing in instruments that appreciate if US equities fall.

  • We believe US Treasuries are unattractive given high US debt levels, especially after the recent rally. We’ve trimmed our US Treasury exposure in our defensive euro-denominated portfolios, reallocating to European government bonds. 

What a difference a few months make

The final stretch of the year is always a good time to pause and reflect. What’s gone as expected? What has surprised us? And what does that mean for portfolio positioning?  

Right now, the US economy is holding up better than many feared. After a volatile first half of the year, distorted by tariff-related swings in trade, growth has regained momentum as trade policy became clearer. Earnings are solid, and the next phase of policy looks tilted towards tax cuts and deregulation – both supportive for markets. 

At the same time, the US Federal Reserve (Fed) has started cutting interest rates again, and we expect more cuts in the months ahead. The latest cut wasn’t a surprise, but there’s a growing conviction behind further cuts amid signs of cooling job growth. 

The latest piece of news grabbing the headlines is about the US government shutdown. Provided that its short-lived, history suggests little economic impact, though it does cloud visibility as key data releases are paused. 

Meanwhile, the AI investment cycle is in full swing. US spending on data centres and intellectual property is booming and now surpasses traditional capital expenditure on machinery and equipment. Put simply, this isn’t just hype. It’s a genuine structural trend that deserves a place in portfolio strategy. 

Adding to US equities while managing risks

Against this backdrop, we’ve decided to increase our US equity stance to a small overweight. The Investment Committee and I believe the mix of fiscal support, easier monetary policy and resilient earnings could lift US equity markets further. Our US economic growth forecasts are now above consensus. 

The AI-driven capital expenditure boom adds a powerful tailwind. It’s transforming business investment and productivity, and we think the market still underestimates its long-term potential. Together, these forces suggest US equities could outperform in the near term. 

To fund this move, we’re closing our minimum-volatility equity position. Those strategies, while useful in more fragile markets, tend to lag in stronger ones. They’re often more tilted towards healthcare – a sector we’re now more cautious about. And they don’t fully protect against drawdowns; they simply fall a bit less. 

We’re also further hedging our US dollar exposure, stripping out the impact of exchange rate changes. With the Fed cutting rates while the European Central Bank and the Bank of England hold steady – and with large US fiscal deficits – the dollar looks vulnerable. Hedging helps euro investors mitigate the dollar’s drag on performance. 

What about US equity valuations? They’re high, yes, but not extreme. Earnings, especially in tech, are strong enough to support them. Still, diversification across investment styles and sectors is more important than ever as market leadership is narrow. That’s why, earlier this year, we diversified some of our US equities using an equal-weighted index that gives more room to sectors poised to benefit from fiscal stimulus and deregulation, such as industrials and financials. 

Finally, where appropriate, we’re adding a form of portfolio ‘insurance’ – a warrant that rises if US equities fall (where client knowledge and experience, and regulations and investment guidelines, permit). It’s not a silver bullet, but it helps partially cushion unexpected shocks for investors comfortable with more complex instruments. 

Portfolio diversification remains key

Tactically, we continue to prefer equities to bonds. Alongside our US tilt, we maintain broad equity exposure across regions – with tactical overweights relative to our long-term allocation targets in Europe, Japan and emerging markets. 

In fixed income, we favour European bonds over their US counterparts. In defensive euro-denominated portfolios, we’ve further trimmed our US Treasury exposure after the recent rally, and added European government bonds, especially short-dated ones, to manage inflation and interest rate risk. 

Inflation in the US and UK remains sticky. We’re holding strategic positions in commodities and inflation-linked bonds to mitigate the risk of persistent inflation. Gold also plays its role as a store of value in geopolitically uncertain times, especially when investors question the independence of the Fed and the credibility of US institutions. That’s why we’re overweight.  

Putting it all together, this is a strategy designed to compound returns – capturing the opportunities we see and guarding against the risks we believe matter for investors. 

We take time to listen

Thank you for reading our monthly update.
Please contact us if you have any questions, remarks or suggestions regarding this update.

Take a look at our other publications below:

This document is designed as marketing material. This document has been composed by Quintet Private Bank (Europe) S.A., a public limited liability company (société anonyme) incorporated under the laws of the Grand Duchy of Luxembourg, registered with the Luxembourg trade and company register under number B 6.395 and having its registered office at 43, Boulevard Royal, L-2449 Luxembourg (“Quintet”). Quintet is supervised by the CSSF (Commission de Surveillance du Secteur Financier) and the ECB (European Central Bank).

This document is for information purposes only, does not constitute individual (investment) advice and investment decisions must not be based merely on this document.

Whenever this document mentions a product, service or advice, it should be considered only as an indication or summary and cannot be seen as complete or fully accurate. All (investment) decisions based on this information are at your own expense and at your own risk. It is up to you to (have) assess(ed) whether the product or service is suitable for your situation. Quintet and its employees cannot be held liable for any loss or damage arising out of the use of (any part of) this document. All copyrights and trademarks regarding this document are held by Quintet, unless expressly stated otherwise. You are not allowed to copy, duplicate in any form or redistribute or use in any way the contents of this document, completely or partially, without the prior explicit and written approval of Quintet. See the privacy notice on our website for how your personal data is used (https://www.quintet.com/en-gb/gdpr).

The contents of this document are based on publicly available information and/or sources which we deem trustworthy. Although reasonable care has been employed to publish data and information as truthfully and correctly as possible, we cannot accept any liability for the contents of this document.

Investing involves risks and the value of investments may go up or down. Past performance is no indication of future performance. Any projections and forecasts are based on a certain number of suppositions and assumptions concerning the current and future market conditions and there is no guarantee that the expected result will ultimately be achieved. Currency fluctuations may influence your returns. 

The information included is subject to change and Quintet has no obligation after the date of publication of the text to update or inform the information accordingly.

Copyright © Quintet Private Bank (Europe) S.A. 2025. All rights reserved. Privacy Statement

Contact us