Fin-X Wealth Horizons MDA December 2025 performance report

Portfolio Performance

The Fin-X Wealth Horizons Managed Portfolio returned -3.15% for the December quarter, underperforming its benchmark by 5.71% for the period.

Equity markets delivered positive returns through the December quarter, though performance remained increasingly concentrated in a narrow set of structural themes. For long-term investors, Q4 reinforced the importance of a disciplined, research-led approach that focuses on understanding the underlying drivers of returns rather than headline index performance.

In the United States, equity market leadership continued to be driven by a small group of companies positioned at the centre of long-duration secular growth trends, particularly artificial intelligence, cloud infrastructure, and data-centre investment. However, market gains were highly concentrated in mega-cap stocks, elevating valuation risk and increasing sensitivity to any shift in growth expectations, earnings momentum, or policy settings. This environment highlights the growing divergence between structural growth opportunities and more cyclical or sentiment-driven exposures.

Australian equities also advanced during the quarter, though performance was less broad-based. Strength in resources and commodity-linked companies provided support as key export prices remained elevated. In contrast, domestically oriented sectors faced ongoing pressure from persistent inflation, higher-for-longer interest rates, and evidence of slowing household consumption.

Looking ahead, markets remain exposed to a combination of elevated valuations in select global equities, uncertainty around the timing and magnitude of future rate cuts, and ongoing geopolitical and policy risks. Within Australia, constrained domestic growth and inflation persistence continue to limit the near-term outlook for broader market participation.

Consistent with the Fin-X investment philosophy, our focus remains on disciplined portfolio construction, high-conviction positioning aligned with long-term secular trends, and rigorous risk management. In an environment characterised by concentration and volatility, we believe a selective, process-driven approach remains critical to preserving and compounding client capital over the long term.

Portfolio Changes

October – No changes

November – No changes

December – No changes

Market Summary & Portfolio Positioning

Market Outlook

Economic stability provides a supportive backdrop for corporate earnings this year. However, market volatility is often driven by changes in valuation multiples rather than earnings alone.

At the start of 2026, market valuations appear elevated. Earnings multiples are particularly stretched in the US and are partly underpinned by expectations of strong AI-related revenue growth. At the same time, market leverage has increased materially. Margin debt has reached record levels, geared investment products have proliferated, and US households hold historically high equity exposures.

Credit spreads are also extremely tight by historical standards, even as concerns grow around the re-leveraging of technology stocks and the sustainability of associated debt servicing. Many AI-focused companies have yet to substantiate market optimism with demonstrated revenue growth, leaving valuations vulnerable to any indication that lower-cost substitutes may emerge. Further rotation into cheaper sectors, including emerging markets, would not be unexpected and may lead to further depreciation of the US dollar.

Government bonds still appear underrepresented in portfolios, leaving yields relatively attractive compared with prospective inflation. Many investors have avoided bonds on the view that government deficits are unsustainable. However, bond volatility indices and breakeven inflation rates provide little evidence of an imminent crisis. With comparatively low deficits and stable governance, Australian government bonds offer particularly attractive yields, even if a further rate increase is confirmed.

Ongoing challenges to the independence of the Federal Reserve help explain why investors continue to broaden exposures toward commodities. Precious metals are much harder to value than traditional assets. However, demand driven by electrification-related industrial use, central bank reserve diversification, and retail investment suggests prices may well continue to move higher.

Market Performance

All major asset classes delivered positive returns in 2025, although performance was less even during the fourth quarter.

Australian and international equity indices recorded a third consecutive year of double-digit gains, recovering from a sharp sell-off following the announcement of US trade tariffs in April. Against a more volatile policy backdrop, equity markets proved resilient. However, strong headline returns obscured significant shifts beneath the surface.

Developed markets continued to reflect the legacy of substantial liquidity injected during the pandemic, particularly through the expansion of the Federal Reserve’s balance sheet. Excess US dollar liquidity was largely absorbed in the fourth quarter following several months of balance-sheet reduction. As liquidity conditions tightened, momentum in technology stocks and cryptocurrencies faded. Strains also emerged at the margins of credit markets, prompting the Federal Reserve to add back some liquidity by purchasing Treasury bills.

In contrast, the People’s Bank of China accelerated the expansion of its balance sheet in the second half of the year. As China’s monetary system remains less integrated with global capital markets, the additional liquidity supported domestic equities and commodity prices. Global investors responded by increasing allocations to emerging markets, while precious metal prices surged.

Although some commentators argued that higher gold and silver prices reflected a loss of confidence in the US Treasury’s ability to fund its expanding deficit, there was little evidence of significant Treasury selling. Global bond yields remained comparatively stable in 2025. Inflation concerns eased, and major central banks continued to trim short-term interest rates, with Japan the notable exception as it persisted with efforts to normalise policy after decades of deflationary pressure.

Stable yields supported international property and infrastructure assets. The post-pandemic decline in property values slowed and appeared to stabilise, while infrastructure attracted capital positioned to benefit from rising electricity demand.

Australian bonds underperformed global peers following a resurgence in domestic inflation pressures during the fourth quarter. The Reserve Bank of Australia signalled that further rate cuts were unlikely and that the next move in the cash rate could be higher in 2026.

The shift in interest-rate expectations weighed on Australian equities, particularly technology stocks. Commodities, materials and energy were the only Australian sectors to record positive returns during the quarter.

Global Economy

Changes in US policy dominated economic discussion following President Trump’s return to the White House in January 2025.

Despite the passage of the “One Big Beautiful Bill” in early July, the second half of the year saw fiscal tightening in the US . This reflected the combined effects of new tariffs, the resumption of student loan repayments, and public sector job losses. In late December, many households also faced a sharp increase in healthcare costs as subsidies expired.

The removal of taxes on tips in early 2026 is likely to provide some relief. However, most tax reductions have favoured higher-income households, which continue to drive consumer spending growth. Lower-income households face an affordability squeeze that has weighed on consumer confidence and is expected to feature prominently in this year’s midterm election campaigns.

Labour market momentum has also slowed. Hiring has stagnated, and the Federal Reserve has noted that, had immigration and labour force participation not declined, unemployment would likely be rising. Nevertheless, outgoing Chair Jerome Powell recently stated that the risks of both higher inflation and higher unemployment have diminished.

According to the Bureau of Economic Analysis, the US economy expanded by +4.0% in the first half of 2025. Harvard economist Jason Furman estimated that 92% of this growth was attributable to investment in data centres and information-processing technology. Excluding AI-related investment, growth would have been just +0.1%.

AI-related investment is expected to continue supporting headline growth in 2026. IMF estimates suggest the US economy could expand at an above-trend rate of +2.4%, also reflecting some spending being deferred during last year’s government shutdown.

Growth could yet surprise on the upside. The Supreme Court is expected to rule on whether country-specific tariffs are lawful under the International Emergency Economic Powers Act. If overturned, the removal of tariffs could provide additional fiscal support, coinciding with the delayed effects of last year’s interest rate cuts.

Any reversal of tariffs would represent a significant setback for the President’s agenda. The US Trade Representative has indicated that the administration would likely pursue alternative measures to maintain recent tariff agreements.

Despite the administration’s continued support for tariffs, there is little evidence that they are delivering the intended outcomes. Manufacturing activity remains in contraction, according to the monthly ISM survey. Meanwhile, China’s trade surplus rose by +7.0% in 2025, even as exports to the US declined. Canada, the EU and other economies have continued to expand bilateral trade agreements, contributing to downward pressure on the US dollar.

China’s domestic economy remains under strain despite external success. December retail sales growth disappointed, rising by a subdued +0.9% year-on-year. Official data indicate that the +5.0% GDP growth target was achieved, but economists expect this year’s target to be adjusted lower, even with additional monetary easing.

The Bank of Japan was the only G10 central bank to lift interest rates in 2025, raising the policy rate from 0.50% to 0.75% in December. Japan’s first female prime minister, Sanae Takaichi, has sought to capitalise on her popularity by seeking a stronger mandate at a hastily called election in February. Her expansionary fiscal agenda has tested perceived limits to government borrowing capacity and sparked a sharp bout of volatility in the bond market.

In Australia, consumer price inflation rose to +3.8% year-on-year in December. The Reserve Bank of Australia appears likely to raise the cash rate by 25 basis points to 3.85% in early February. Consensus expectations suggest the Board is unlikely to pursue a sustained tightening cycle. The year-end cash rate is forecast at around 4.15%, implying only a modest probability of as many as three rate increases.

While inflationary pressures are evident, the unexpected decline in December unemployment to 4.1% likely overstates underlying economic strength. Employment growth of +1.1% in 2025 lagged population growth of +1.9%. But the Reserve Bank remains alert to the risk that population-driven demand could exceed the economy’s productive capacity, leading to risks of overheating.

Despite geopolitical tensions and offsetting forces within economies, the global outlook has remained remarkably stable. Policymakers continue to anticipate steady employment and interest rate conditions. In January, the IMF forecast global growth of +3.3% in 2026, matching 2025, before slowing to +3.2% in 2027. Aside from stronger US activity, no major region is expected to see GDP growth shift by more than ±0.2%. Similarly, the RBA’s November forecasts project Australian growth fluctuating between +1.9% and +2.0% through to the end of 2027

Disclaimer

The contents of this communication are prepared by Brerona Capital Asset Management Pty Ltd (A.C.N. 627 650 293; AFSL 520526 trading as Fin-X Wealth). Any advice contained in this communication is general advice and does not take into consideration your personal objectives, goals, needs and financial situation. You should therefore not rely on the information contained in this email to make any investment decisions without first consulting an investment professional such as your financial adviser. Where there is any reference to specific products, you should obtain the relevant Product Disclosure Statement(s) and familiarise yourself prior to making a financial decision. The authors have relied on external data sources and as such do not guarantee the accuracy of the information, as such you should independently verify all data yourself. Any unauthorised use of this communication is prohibited. This email (including any attachments) is intended only for general information purposes. You must not copy, reproduce, disseminate, or use this document and its contents without seeking prior approval from Fin-X Wealth. We track our performance based on trade date +1 day, and we make the assumption that trades were placed at this time, this may not always be the case. This may result in timing differences for trades placed through our custodian not perfectly reflecting the reporting function which reports the end of day price. Actual performance you experience may not truly reflect the results outlined in the table due to timing differences, commission differences etc. Please take these performance numbers as indicative only.