Snakes & Ladders – What's Changing? – 1,100% Gains

With Brian away this afternoon, I’m stepping in for the update this week. And with Valentines Day upon us, I couldn’t resist drawing a quick parallel between relationships and investing.  Both demand patience, level-headedness, and willingness to learn from mistakes - whether it’s a poor investment or forgetting an anniversary (we’ve all been there!). It's not the misstep that defines us, but instead how we learn from them, and how we adjust going forward.  
 
This theme is something we covered in Embrace Your Mistakes: The Ultimate Measure of Success, highlighting the 4 stages in the investors journey: information, knowledge, wisdom, expert.  
 
Sitting behind this progression is the insight of Benjamin Graham that:  
 
“The investor's chief problem - even his worst enemy - is likely to be himself"
 
Even if you might fairly describe yourself as at the “expert” stage, which we describe in detail in the above blog, it is not a fixed state. It requires ongoing effort, self-reflection (not easy!) and concentration to maintain that status.  
 
This challenge is even greater in today’s extraordinary financial markets. It’s not just the host of measurable extremes but the cacophony of noise that makes it harder than ever to cut through the distractions.  The headlines are relentless – whether it’s the ongoing trade tensions or other distractions, like this week’s Trump soundbite about sharks, unaffected by plastic straws as they “munch their way through the ocean.” 
 
The noise of recent weeks is the siren call, and as investors, is a serious distraction, dragging decision-making from rational to emotional – or from “expert” back to “information” stage as if we were playing a game of snakes and ladders.  
 
Sifting through this noise will help you be less distracted. 
 
Take Trump tariffs and China. The latter's retaliatory tariffs were more symbolic, about showing their teeth, ensuring that Trump knows they are not easy targets like Mexico and Canada. The trade war, so far, has been more theatre (distraction?) than substance. 
 
Both countries have been working to reduce their interdependence since the financial crisis in ‘08, and China in particular has worked hard at expanding trade and soft power around the world, not just in Asia. 
 
This might explain why the response of financial markets has been rather muted, even after more tariffs this week on steel and aluminium into the US and reciprocal tariffs on any country that charges duties on US imports.  
 
But there has been an interesting shift happening under the surface, and the evolving picture is important. 
 
The table below shows the returns since Trumps election, compared to year-to-date and one-month performance.  Although tech is the clear winner since the election, more recently it has been giving way to the cheaper, value sectors at the top of the table. 
 
Performance since Trump's election vs. YTD vs. 1 Month, sorted on 1 month returns: 
 

 
Tech has cooled off since the beginning of the year, and value sectors, the likes of China, Latin America, the UK and Europe, have all started gaining momentum. The global investment landscape is clearly shifting. 
 
Investor expectations for the US are evolving, driven not just by the release of China’s DeepSeek R1 (covered in our January note here), but also by ongoing inflation concerns that have been building for months. Even if people aren’t really buying the severity of Trumps tariffs, the reality of rising inflation have been clear for some time. Data out of the US on Wednesday confirmed this, showing consumer prices rising at the fastest pace in nearly 18 months. Markets reacted as if it were a shock, but it really shouldn’t have been.   
 
Given these building expectations of higher inflation and higher for longer interest rates, why is gold continuing to hit all-time highs? 
 
Typically, gold struggles in a high-rate environment because it doesn’t pay income. But here we are, with rates high and gold hitting all-time highs. Historically, gold moves inversely to the dollar, but both have been rising together. Something else is at play. 
 
Central banks, especially in Asia have been steady buyers. China and India have been quietly accumulating for years. Who exactly is buying, and why, is often unclear and sometimes deliberately so. But concerns about US debt, distrust of American leadership, geopolitical risks, and the global shift away from the dollar all fuel demand. Meanwhile retail investors are barely on board yet. With the recent return of Trump already proving uncertain with what he’s going to say next, this all adds to buoy a price trend already well established.  
 
Turning to another commodity, oil - the ongoing BP takeover discussion and the potential of bumper investor profits from a break-up has been anticipated for years. This is a significant reminder that large parts of the U.K. stock market are cheap, from the giants to the minnows, and predators are circling. This bodes well for investors into U.K. equities. 
 
Wrapping up with an update on three Dynamic Portfolios that are up for review this month. 
 
Dynamic UK Blended sees three larger cap funds replace the smaller cap ones as UK smallers struggled to keep their momentum. Since inception this portfolio is up over 1,000% which is more than 4.5x the index. 
 
Dynamic Japan on its regular three-month review cycle, had a decent period, gaining 3.75%. Meanwhile, Dynamic World Ex UK, always an intriguing mix, was up slightly and now has funds from China, US small caps, and US large caps. Its long-term return of 1,100% is more than double that of FTSE World ex UK.