Kepler View

In our view, these are good results for income investors. Schroder Income Growth (SCF) raised its dividend by 4.1%, not only extending its growth record to a 31st consecutive year but once again staying ahead of inflation. Since 1996, dividends have compounded at an annualised 4.1% against inflation of 2.5%, providing real growth over multiple market cycles. Sue has overseen half of that period, and her process has been central to sustaining it, steering the portfolio through very different markets without anchoring to a single style or reaching for unsustainable yields, which gives us confidence in the durability of SCF’s income.

Over the year, Sue took profits in higher-yielding winners such as Lloyds and TP ICAP, recycling the capital into businesses like RELX and LSEG, which yield less but are highly cash-generative and could support stronger income growth in future. There were challenges, though. Diageo and Taylor Wimpey were among the holdings to cut their dividends, and with cover at 0.89×, the revenue reserve has thinned to 5.07p per share. However, we think it’s important to remember that SCF has access to substantial realised capital reserves, which give the board ample support. Moreover, Sue notes that the shift towards buybacks has left ordinary dividends across the market better covered.

Regarding changes to the portfolio over the year, we think RELX and LSEG highlight Sue’s willingness to lean against the market. Both sold off sharply earlier in the year on fears that AI would erode their businesses, with RELX falling by double digits in a single day after Anthropic launched an AI legal tool in February, and Sue used that weakness to add to RELX and open a position in LSEG. These changes make sense, in our view, as AI is only as good as its data. Both businesses own proprietary, constantly refreshed datasets for customers, from lawyers to traders, who need answers that are accurate and auditable. Rather than being bypassed, they are building AI into their own products or, in LSEG’s case, supplying the data third-party tools rely on. We think their rally since July suggests the market is coming round to that view.

More broadly, the UK backdrop looks supportive for SCF’s approach. Over the year, 26 of SCF’s 46 holdings announced buybacks, and as Sue anticipated, the trend is spreading to mid-caps, including existing holdings like Hollywood Bowl, Fevertree and QinetiQ. M&A involving UK companies also doubled to £65bn in the first eight months of 2026, reinforcing Sue’s long-term view that UK equities offer value the market has been slow to recognise. And with around three-quarters of portfolio revenues generated outside the UK, SCF offers far broader exposure than its domestic label implies.

There are, of course, risks to weigh. The consumer discretionary overweight held back relative returns this year, recovery positions such as Diageo may take time to come good, and higher bond yields or renewed geopolitical tension could test sentiment towards equity income, as they did in 2023. Even so, we think the balance looks favourable. Sue sees the clearest value among small and mid-sized companies, where SCF has meaningful exposure, and investors can access that opportunity at a 6.8% discount, at the time of writing, wider than its five-year average, with costs now lower at an OCF of 0.57%. With a current yield of 4.2% and a 31-year record of dividend growth behind it, we think SCF is potentially well placed to turn the cash UK companies are returning to shareholders into a rising income for its own.

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Performance & outlook

Manager Roland Arnold has a strong emphasis on individual companies with his management of BlackRock Smaller Companies (BRSC). He focuses on company fundamentals, looking for factors such as strong recurring revenues, good cash generation and robust balance sheets, and then buying these at a good price.

In recent months, Roland notes a big disconnect between the strong operational performance of his holdings and their share price movements. For example, his top ten holdings all increased their earnings forecasts in the trust’s interim results period; however, half of these companies underperformed the index in share price terms and six saw their valuations derate. This trend has been a near-term headwind to performance and impacted long-term returns, with a NAV total return of -16.6% over the five years to 27/10/2026, compared to 12% for the trust’s benchmark.

Whilst the highest-conviction positions delivered operationally, this failed to translate in share price performance, although there were several holdings throughout the portfolio where a more logical response occurred. The biggest of these is Polar Capital, which benefitted from both strong performance from its asset management activities as well as good investor inflows, with their technology funds a notable contributor to this. The share price is up c. 43% year-to-date (27/10/2026), including a strong first half of the year.

The combination of financial services and technology is a similar theme behind the recovery in Roland’s holding in IntegraFin. This has been a long-term holding and has rewarded his patience in the trust’s half year. The cost-cutting plans of the firm’s management team have begun to deliver success, resulting in a modest re-rating in the stock during 2026 and contributing positively to BRSC’s performance. Roland continues to hold the position, expecting the decision to invest in their own technology, rather than rely on third parties, to deliver further positive results.

The manager’s recent addition to Computacenter has also already contributed positively to performance. The firm recently moved into the trust’s investable universe and offers exposure to the boom in IT spending which has driven markets globally. The firm has operations in the US which have been particularly impactful on earnings and have fed through to share price returns and a positive contribution.

The housebuilding and construction sectors in the UK have been under pressure for much of 2026, and Roland’s decision to not own Vistry Group resulted in positive attribution versus the index. The firm has not only been impacted by wider industry challenges but also seen management changes which the market has treated negatively.

What we believe is notable from these top contributors is the wide range of industries they come from and the different drivers impacting them, ranging from asset management to tech hardware, which shows the potential benefits of a stock selection approach.

That said, several of Roland’s stock picks have detracted from performance. The most notable is mobile payments network company Boku which released a profits warning in July 2026 due to two contract suspensions and a delayed customer rollout. This resulted in a sharp decline in the share price and detracted c. 1% from BRSC’s NAV. The manager has reduced the position considerably whilst he analyses the ongoing impact, although notes that the firm’s core offering is still an appealing proposition. Elsewhere, weak sentiment impacted several holdings. The most notable of these was Serco which fell c. 20% in the half-year period due to political rhetoric impacting the outlook. However, Roland notes the firm’s government contracts are all long-term which should be supportive for earnings over the medium term and the near-term volatility is just noise.

Looking forward, the manager is cautiously optimistic for the outlook for the UK. Whilst the fallout from the budget will be critical to near-term sentiment, he notes recent political changes indicate a more pragmatic approach to the economy. That said, there continue to be significant geopolitical risks, primarily related to ongoing wars in Ukraine and Iran, which is causing supply chain disruption and inflationary pressures. However, Roland remains focused on company fundamentals which has led to a portfolio with strong underlying characteristics, which are led by high-quality management teams. He notes many of his holdings are leaders in their markets and supported by strong balance sheets which will enable them to maintain their pricing power and see them through the difficult period. Despite this, the portfolio and asset class more widely remain valued at depressed levels, meaning the long-term recovery prospects are not factored in, which could lead to considerable upside for patient investors.

Positioning

The process used for building the portfolio for BRSC has been in place for over 20 years and focuses on identifying high-quality companies towards the lower end of the UK smaller companies market-cap spectrum. Manager Roland Arnold aims to identify stocks that can generate long-term, sustainable returns through high levels of recurring revenue and capital-light business models. In addition, he has a strong focus on potential holdings’ management teams which involves meeting with the company to understand their approach.

Roland takes a long-term view on investments and is willing to show patience for stocks whilst the market takes the time to appreciate their potential. To this end, portfolio changes can be limited on occasion, although that will not stop the manager reacting to a changing situation. As discussed in the performance section, Roland notes a big disconnect between fundamental and share price performance recently, which has provided an opportunity to add to several holdings at much better valuations. One example is convenience food firm Greencore. Roland notes shares fell c. 20% despite a solid interim statement which provided an opportunity to add to the position, which is now the largest in the portfolio.

Another addition has been to MONY Group, which operates the MoneySuperMarket and MoneySavingExpert sites, amongst other business lines. Its shares sold off heavily in Q1 2026 as the firm was considered at risk from the increasing use of AI, which would reduce traffic to its sites. However, Roland notes that MONY is being adopted by OpenAI, the owner of ChatGPT, as a provider which indicates the firm is likely to be a useful source for AI, rather than disrupted because of it, and therefore he added to his position. We note the share price has rallied significantly since the early-year sell-off, and is up c. 11% year-to-date (27/10/2026).

Demonstrating his flexibility, Roland has reintroduced two stocks that were previously sold down. One is technology hardware firm Bytes Technology. This was originally bought at IPO but sold after a strong rally which led to what he believed were stretched valuations. The firm then endured a tough period due to some management missteps which has created a more attractive entry point, with the investment case supplemented by changes in contract terms with key stakeholder Microsoft. The other returning stock is Serica Energy, which has been a beneficiary of the higher oil and gas prices caused by the Iran war. This has helped contribute to better operational results, as well as leading to net cash on the balance sheet, with with M&A potential also adding to the investment case.

M&A was a factor in several portfolio exits. This has been a feature for UK smaller companies over several years although bids for BRSC’s portfolio holdings had proved elusive. However, in the past year, holdings MITIE, Senior, Gooch & Housego and Bodycote have all been bid for, with the first three of these exited as a result. Roland continues to hold Bodycote as he believes there is the prospect of an increased offer. We note that the M&A effect had previously been a headwind to relative performance therefore the increased prevalence in the portfolio is an encouraging sign of attractive valuations, in our view.

Elsewhere, there have been some disposals as a result of good performance. As mentioned, Polar Capital has delivered strong fundamental performance which has resulted in a share price uplift. Roland has used this opportunity to take some profits in the position and reduce its size, whilst also dampening the near-term risk of the shares falling as the tech tailwind eases. The success of trading platform IG Group has led to the stock being promoted to the large-cap FTSE 100 Index, which has led to its sale from the portfolio, in line with the investment strategy. The manager also reduced the position in Great Portland Estates due to the elevated risk of rising yields on property values, although the position remains in the top ten holdings, which we have shown below. We note the top ten is relatively flat, in line with Roland’s reasonably diversified approach to portfolio construction, with the portfolio consisting of 87 holdings as at 31/08/2026.

Kepler View

Whilst it is still early days for the recently revamped BlackRock Smaller Companies (BRSC), we believe there are some encouraging data points for investors. The strong operating performance of many holdings is a positive, and arguably demonstrates a level of resilience within the portfolio. With the domestic UK economy, to which smaller companies are heavily exposed, having seen more than its fair share of headwinds over the past few years, an improvement in company fundamentals could be seen as a sign that the worst of these conditions are behind Roland’s holdings.

However, this hasn’t yet been reflected in share price, which may require further patience. There are instances where this has paid off though, such as the recovery in IntegraFin which contributed positively in the period. Should this pattern of holdings with good operational performance belatedly being recognised and rerated by the market, it would be encouraging for BRSC.

The ongoing depressed valuations seen in the UK smaller companies mean any recovery could have a long way to run. The market has been out of favour for several years, but as we discussed in a recent article, encouraging economic data could spark a return to form. One outcome of these depressed valuations has been the high levels of M&A in the asset class over the past few years. Whilst BRSC has generally seen limited bid activity, this notably picked up during the latest results period. We believe this is a further piece of evidence that BRSC’s portfolio offers strong potential, which is beginning to be recognised by institutional investors.

The valuation angle picture is further enhanced by the trust’s wide discount, in our view. The current level is wider than the five-year average, and one of the widest in the peer group. Should sentiment return to the asset class, an investment at this level could have a leveraged effect, as both NAV growth and discount narrowing contribute to shareholder returns.

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The month started with Flavio Bolsonaro, son of imprisoned former President Jair, winning the first round of the Brazilian presidential election, spurring a c. 15% rally in the country’s BOVESPA stock market. That move was more than reversed when the left-wing incumbent Lula turned the result around to triumph in the second round run-off three weeks later.

Looting and riots broke out in France, before spreading to other European countries, thanks to anger with the government, which remains in disarray and losing ground to the far-right National Rally party led by Marine Le Pen.

On the artificial intelligence (AI) front, we saw a repricing in the corporate bond markets and the build-up to yet another blockbuster IPO. Anthropic filed its long-awaited S-1 to register for a flotation on the Nasdaq. It is expected the large language model provider will raise c. $100bn at a total valuation of $1.5trn, blowing SpaceX’s June offering out of the water.

That news was tempered by worries over the financial viability of so-called neoclouds, which are specialist cloud computing firms that rent out high-performing computing power to businesses. Yields on the bonds of CoreWeave, the poster child for this particular subsector, soared as high as c. 15% as bond investors doubt whether it can stay solvent.

That’s not to mention the hack of Binance that saw an estimated $6.3bn (£4.7bn) in bitcoin stolen, possibly from North Korea, which has been called the biggest bank heist in history.

It says something that the Budget from the UK’s Labour government was the least consequential event of the month, essentially landing as a bit of a damp squib.

Top 10 most bought and sold shares in October

These were the most (and least) popular shares with UK retail investors on three of the largest investment platforms last month:

Making bank

Investors certainly decided that the spectre of another tax-raising Budget presented them with an opportunity to go bargain hunting. The share prices of bank stocks had fallen in the weeks leading up to Healey’s speech on fears he would slap a punitive windfall tax on the sector.

Lloyds Banking Group (LLOY), Barclays (BARC), NatWest (NWG) and HSBC (HSBA) saw their shares fall between one-fifth and a quarter between July and late October. That reversal came after a strong run, and on speculation that Healey would entirely reverse the last Conservative government’s cut to the bank corporation tax surcharge. Rishi Sunak and Jeremy Hunt had slashed it from 8% to 3%, and the fear was Healey would reinstate the previous level.

UK banking stocks seem to account for a disproportionately high share of British investors’ portfolios, presumably thanks to their premium yields, with the sector’s dividend payouts offering yields of anywhere between 2.5% and 6%.

Investors, then, saw the chance to top up their bank exposure (having potentially trimmed it after what had been a strong run-up in share prices over the past few years). In the end, the surcharge was doubled: a significant hike, but not as bad as many worried and we’ve seen a relief rally of sorts since the Budget.

The proceeds of war

One significant trend we saw last month was a rationalisation of the beneficiaries of the conflict in the Middle East (and those wars continuing elsewhere). The oil majors have had a tailwind for most of this year, thanks to the US and Israeli strikes on Iran that started in February.

The main corollary of this action has been a meaningful spike in the price of oil, given the Strait of Hormuz, the Gulf waterway through which c. 20% of the world’s supply of oil travels, has been effectively closed ever since.

Shares in BP (BP) had risen c. 50% since the start of 2025 and c. 100% since the start of 2021, while Shell (SHEL) had seen a rise of c. 60% and c. 150% during those respective timeframes, providing some profits for investors to take through October.

We’ve seen a modest reversal in sentiment to both stocks since late October, suggesting the time had been right to book those gains.

For the defence contractor Rolls-Royce (RR), things were different, with the stock remaining on our most-bought and most-sold lists. The firm’s explosive growth has made it a mainstay of portfolios recently, thanks largely to gains of c. 800% over the past five years, providing some profits for holders to take but also, combined with a fall of c. 25% between August and October, a compelling narrative for new investors to cling onto.

While RR has benefited from rising defence sales thanks to increased military spending around the world, it also sells commercial aeroplanes, an industry that has been hit hard by rising jet fuel prices.

Clearly, some are taking the view that buying the dip is a prudent strategy, whereas others feel that even with the stock in bear market territory, a price-to-earnings ratio of c. 35x seems expensive.

Top ten most bought investment trusts in October

Moving onto investment trusts, and the top of the list remained broadly unchanged, but we did see some new entries further down the list:

Growth no more

One notable feature of markets in October has been a repricing of the AI trade. Indeed, the end of the month saw a devastating reaction to the results of some big names.

Google owner Alphabet (GOOGL) saw c. $500bn wiped off its value thanks to its admission that its AI search summaries were affecting advertising revenues. On the same day, Intel (INTC) fell c. 28% on weaker demand for computers. Other AI or AI-adjacent names fell as spending continued unabated, while as previously mentioned neoclouds such as CoreWeave (CRWV) were hit hard.

This has all provided a strong headwind for tech-heavy investment trusts, with Allianz Technology Trust (ATT) and Polar Capital Technology (PCT) down c. 18% and 20% respectively over the past month.

Investors pounced, seeing the drops as a chance to top up their tech exposure at much cheaper prices. Scottish Mortgage (SMT) remains ever-present at the top of the list and has been much more resilient, falling c. 8% thanks to its more diversified and less tech-heavy portfolio. It may also have been boosted by the filing for IPO of Anthropic, a top holding in SMT.

Wind in its sails

One notable trust that has had a better time of it recently has been Greencoat UK Wind (UKW). The UK wind farm owner has been another regular on our list, as its wide discount has attracted bargain-hunters.

UKW’s shares are up c. 20% over the past six months and the discount has narrowed from c. 28% this time last year to c. 11% today. We suspect that the change in sentiment has simply been a re-examination of the investment case for the trust, as our view has long been one of a mis-pricing when it comes to UKW.

Importantly, the rise in UKW’s share price has come at the same time that bond yields have been rising. The last time we suffered a spike in bond yields was during the interest rate hiking cycle through 2022, a time when the infrastructure and renewable energy infrastructure sectors sold off heavily in unison. This was because the yield premium on trusts in both sectors over UK government bonds had evaporated. Investors could suddenly get paid a similar yield on a much safer investment, so deserted the sectors.

The 10-year gilt yield has risen c. 1 percentage point since the end of February, yet trusts such as UKW are up c. 30% in that time. In our view, this has happened because the yield premium offered by renewables and infrastructure trusts is back to attractive levels again. Indeed, at the current share price, the yield on UKW’s target dividend for 2026 is c. 8.8%, a 3.6 percentage point premium, potentially offering downside protection for shareholders should yields rise again as well as re-rating potential if yields continue to fall, as they have done more recently.

The month ahead

After October gave way to November, we had potentially the most significant market event since the Iran conflict began: the US mid-term elections. Voters gave a clear rebuke to, depending on one’s view, either President Trump alone, or the Republican party overall. Indeed, the Democrats managed to comfortably flip both the Senate and the House of Representatives, providing a divided government for the final two-and-a-half years of the Trump presidency.

In the lead-up to the election, markets had been expecting this and had fallen back in the worry that it would mean less market-friendly policies and/or gridlock. In the event, markets actually jumped the day after the election on the hope that gridlock would prevent Trump pursuing his more fiscally irresponsible policies and finally rein in the debt-to-GDP ratio.

Perhaps the most consequential outcome of the blue wave, though, relates to the artificial intelligence trade. The elections have been seen by some as almost a referendum on data centres.

The Democrats won both the governorship and senate race in Texas, a state that accounts for c. 25% of all planned US data centre power capacity. New governor Gina Hinojosa has been critical of the data centre build-out. As have Amy Acton and Sherrod Brown, who won in Ohio; Keisha Lance Bottoms and Jon Ossoff, who won in Georgia; and Abdul El-Sayed and William Lawrence, who won in Michigan.

It remains to be seen what the scale of the Democrats’ victory means for the AI trade in the long term, but we’ve already seen Dina Powell McCormick, Meta’s President and vice chair, suggesting hyperscalers will not be asking if they need to start building data centres outside of the US. In addition, some newly elected senators and governors have been rowing back slightly, suggesting the compromise might be building them further away from people’s homes and businesses.

Time will tell whether this is another good buying opportunity for AI bulls, or validation at last for the bears.

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Kepler view

International Biotechnology Trust's (IBT) excellent results illustrate the success of the managers’ top-down analysis, validating their long-held view that M&A would surge to address large cap pharma’s looming revenue shortfall. They also validate their bottom-up stock selection approach, Ailsa and Marek having successfully identified many companies that have become targets or succeeded under their own steam. They build on the success the managers have had since taking over in March 2021. Most of this period was tough for the industry, but Ailsa and Marek outperformed, and they have now also done so in the first bull market they have been in charge too. We think the combination of macro positioning, which has seen the managers take risk up and down and shift between large and small adeptly, and good stock selection makes IBT an attractive way to play the high growth but volatile biotech industry.

Since the end of the financial year, much of the industry has sold off, and IBT’s NAV has too. A US rate hike and the potential for more is likely a key reason, given the importance of US rates to biotech valuations, while there have been some concerns about economic growth and stock market valuations which may have made investors more cautious. However, we think the patent cliff should provide some strong structural support to the industry. We may see the prices paid deflate a little, but large-cap pharma’s motivation for buying is not rate-sensitive, and increasingly urgent. Already this financial year has seen Merck return to the market to buy out another IBT holding, Silence Therapeutics, at a 130% premium to the pre-announcement closing price.

For this reason, we think IBT continues to look like an attractive source of growth and income for those with a medium- to long-term view. Ailsa and Marek have taken their exposure to small-caps down a little in recent months, and shifted the portfolio to clinically de-risked companies, maintaining their focus on those with strong balance sheets that can be self-sustaining. This shows they recognise the near-term risks and want to be more cautiously positioned than a year ago, particularly ahead of the US mid-terms which could be another source of volatility depending on how the discourse and the voting goes. However, as their commentary in the report makes clear, clinically de-risked companies are also those which are closest to getting drugs to market, which should make them prime takeover targets. So, this is certainly not a defensive position, but reflects where the managers view the best risk-adjusted potential. Indeed, the managers note, “the backdrop for the sector is the strongest we have seen in several years,” with M&A, a broad range of important medical breakthroughs and plenty of companies with strong commercial potential all contributing to the medium to long-term attractions.

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Performance

Biotech Growth's (BIOG) managers, Geoff Hsu and Josh Golumb, delivered significant outperformance of the Nasdaq Biotechnology Index in the recovery rally which started in April 2025. To illustrate this, in the trust’s financial year ending 31/03/2026, a NAV total return of 74% was over twice the index return of 35%. The SMID-cap bias was beneficial as these companies rallied the furthest, while positive gearing and multiple acquisitions of portfolio companies also boosted returns. The index continued to perform well in the first quarter of the current financial year, before a significant sell-off began in August.

Small-caps have been hit harder in this sell-off, which is the typical pattern. However, successful results in a cancer drug trial by Moderna, which BIOG did not own, were another factor driving large caps ahead of small caps. Moderna’s shares more than tripled on the news, which was presented as a successful cancer vaccine, although the drug is a personalised treatment intended to stop spread or recurrence in someone already suffering from melanoma. There is hope that successful results will be replicated in ongoing trials for other cancers. Moderna has been a remarkably volatile stock over the years, and so we think some caution is warranted.

Concerns about inflation potentially leading to rate hikes started to affect the market in July, and M&A also went quiet. In terms of the former, we have seen one rate hike, and the possibility of others may be weighing on the market. Geoff and Josh argue it is volatility in US ten-year treasury yields rather than high rates themselves which tends to hit biotech the hardest, so clear forward guidance could be what is needed for a recovery, even if that involves another hike in the short-term. In terms of M&A, October has seen Merck return to the table in pursuit of new drugs to replace sales of Keytruda, responsible for around half its revenues. This is a prime example of the situation the large caps find themselves in: even if the rates outlook remains unhelpful, they have a desperate need to replace sales which are likely to be lost in the coming years. Industry estimates are for c. $450bn in revenues to roll off-patent by 2028.

A return of M&A would be likely to benefit small and mid-caps the most, and BIOG remains tilted to these segments. This is a major reason behind its track record of significant outperformance in rising markets and underperformance in falling markets, which can be seen in the chart below. While the managers have dialled back the gearing and their exposure to small-caps, we expect this performance pattern to remain, and as such BIOG could be a good option for those who want to maximise the potential to benefit from a sector-wide rally, albeit at the cost of downside risk.

For compliance purposes, we show the five-year chart below, with the cumulative relative performance in red, where an upwards-sloping line denotes a period of outperformance and vice-versa. This period captures three poor years for the sector (see chart above), and as such BIOG’s NAV total return of 15.2% compares to a 49.6% total return for the ETF. However, BIOG’s outperformance since April 2025 is visible, as well as the sharp selloff in recent weeks.

Positioning

High exposure to small and mid-caps and positions in lots of potential M&A targets remain features of the portfolio’s positioning. This is despite the managers recently tilting slightly from small to mid-cap. It’s also worth noting that Geoff and Josh insist that any position they hold is attractive in its own right, rather purely as a takeover target, meaning that an acquisition is not the only route to a payoff.

Another feature worth highlighting is the exposure to Asia, specifically China. Traditionally, the biotech industry has been heavily concentrated in the US. However, China is rapidly growing in importance when it comes to medical innovation, and in March 2026 the 15th Five-Year Plan was adopted which identifies biomanufacturing and advanced materials as prioritised areas for technological breakthroughs, elevating it alongside semiconductors and electric vehicles as key drivers of growth. This builds on years of investment and progress, with China accounting for 32% of trial starts in 2025, up from 18% in 2019 and 6% in 2014. OrbiMed has two analysts based in Hong Kong covering this growing centre of innovation, which allows them to assess Chinese companies as competitors or as takeover targets - Chinese biotechs signed a record $60bn of cross-border licensing deals in Q1 2026.

BIOG’s exposure to China is reasonably low at present, with 3.7% in the country as of the end of September. However, the managers have taken this up much further in the past, but are cognisant of valuations as well as growth potential when assessing opportunities. With OrbiMed having a locally-based team, we think the trust is in a very strong position to benefit as the Chinese biotech sector develops, which may come at a very rapid rate. The team cover other Asian countries too, and BIOG had 1.7% invested in Taiwanese companies as of the same date, so this is more than just a China story.

OrbiMed’s venture arm gives Geoff and Josh earlier sight of companies and better understanding of their competitive positions. They also have the option to invest in unlisted companies, although exposure here was below 100bps when we last spoke to the manager. While the unlisted and China exposure have the potential to add alpha and to figure highly in the portfolio in the future, at present it remains heavily focused on the US and on clinically de-risked companies, many of which are potential M&A candidates.

Kepler View

We think the recent pullback could be a good opportunity to add to the biotech industry. The potential for more rate hikes in the US could weigh on the market in the short term, but we think the fundamentals will reassert themselves once there is some clarity. For us the key fundamentals are the looming patent cliff which means large cap pharma needs to buy in new drugs to replace lost sales, and the strong state of innovation across multiple clinical areas. Biotech is an exciting industry market which has delivered exceptional returns in bull markets and could be a good addition to a growth-focused portfolio.

BIOG’s use of gearing, SMID-cap tilt and highly active stock selection mean it has all the tools to take advantage of this growth and add alpha, although these factors mean it is likely to underperform in a falling market. Additionally, we like the strong presence in Asia, and think it could be of great benefit to long-term shareholders given the outlook for the industry in China. Meanwhile, the unlisted exposure offers another avenue for alpha generation. It is unashamedly a return-seeking proposition, which we think should appeal to long-term growth investors looking to maximise returns and take advantage of some short-term weakness in the market.

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In my view, the real beauty of passive investing is in its simplicity. My partner, Dani’s, portfolio consists of three funds: the Vanguard FTSE All-World ETF, which gives her exposure to the world’s biggest firms; the iShares S&P SmallCap 600 ETF, which covers off US smaller companies and may soon be replaced by a global offering; and Scottish Mortgage (SMT), for some spice.

I suggested mainly passive funds, not because I dislike active fund management, as you can see from the appearance of SMT; but because owning three funds is low maintenance and easy to understand.

I’m happy to back active management myself because I like the challenge and hope I’m good at it. For others, the investment case for index funds in my view is that the average actively managed fund underperforms broad indices after costs and it’s hard to predict which ones will do well. Taking broad exposure makes sense when you look at it like that.

Today, though, it seems most passive advocates’ case for index fund investing is that active management is some kind of con that continues to rip consumers off. That, clearly, isn’t true, as proven by the fact that SMT is the best-performing fund in Dani’s portfolio.

Indeed, passive investing isn’t without its own pitfalls. As it grows in popularity, more ETFs are being launched in evermore niche, thematic areas (and that’s not to mention the leveraged single stock ETF nonsense). Even many of the ETFs that should be more mainstream turn out to be questionable, at best; misleading at worst.

Mr Chips

Take value investing. Along with investing in smaller companies, investing in cheap stocks is one of the two best ways of outperforming over time. The annual value premium in the US stock market between 1927 and 2025 was c. 4.2%, according to the Fama-French Three Factor Model. Value stocks have outperformed growth stocks almost 60% of the time (in 59 of the past 99 years).

The difficulty with this data point is that it’s not possible to track in a fund: the data is very much bespoke. It establishes the returns from large-cap value and small-cap value stocks, as judged by book-to-market ratios and takes away the returns of large-cap growth and small-cap growth stocks. If the final number is positive, value stocks outperformed and vice versa.

Still, I think it’s important to have some exposure to value stocks, given these findings. Yet, a browse through the largest global value ETFs, using the website JustETF.com, shows something rather odd. The MSCI World Enhanced Value Index is more concentrated than its broad, market-cap-weighted counterpart.

The iShares Edge MSCI World Value Factor ETF has 14% of its c. £5.5bn assets invested in Micron Technology (MU), the memory chip maker that I’ve long thought represented one of the biggest bubbles of the artificial intelligence trade. MU’s shares are up a staggering 333% in the space of 12 months. The US version of the iShares ETF has 21% in MU and a further c. 3% in Cisco (CSCO).

Both MU and CSCO have book-to-market ratios of c. 0.12x, according to Bloomberg. That’s lower than the S&P 500’s average of 0.18x and doesn’t smack of value stocks to me.

Most other value ETFs allow MU in thanks to its low forward price-to-earnings ratio, which is predicated on a massive and enduring spike in earnings that may or may not materialise. They also have exposure to the likes of Applied Materials, Lam Research, Apple, Alphabet, Amazon and Microsoft. Value is, of course, subjective, but these aren’t what I’m looking for.

Fertile ground

The global value funds I invest in tend to be open-ended, but I do have some good value investment trust options. I mentioned the two factors that outperform over the long term are small-caps and value, so you can guess that small-cap value has a place in my portfolio.

The UK is a good hunting ground here. Aberforth Smaller Companies (ASL), which was recently awarded Kepler’s Growth rating for 2026 thanks to strong performance, is a mainstay of my portfolio thanks to management’s rigorous value approach.

That’s supplemented by allocations to Rockwood Strategic (RKW) and Odyssean (OIT), which both take a private equity-like approach to appraising and engaging with micro-cap companies and have some of the best performance records of all UK equity trusts.

Sticking with the UK, Temple Bar (TMPL) remains a key component of many-a portfolio, as does Fidelity Special Values (FSV), which takes an all-cap approach, blending large caps with smaller companies.

A recent addition was BlackRock Latin America (BRLA), after an overreaction to Lula’s shock presidential election win that saw the BOVESPA (and BRLA) slump c. 17% on the news. Still, stock returns have been impressive during Lula’s tenure(s) in power, and the likelihood is he won’t be overly market-unfriendly – and Brazilian stocks look cheap, anyway.

We’ve seen a real uptick in popularity for value investment trusts in recent years, buoyed by improving performance. OIT, TMPL, Murray International (MYI), BlackRock American Income (BRAI) and City Of London (CTY) are trading at premiums at the time of writing, with RKW, FSV and North American Income Trust (NAIT) not far behind.

With the ETF industry becoming more growth heavy, even in their supposedly value-focused offerings, the investment trust universe could be beneficiaries if and when we see wobbles in the AI trade.

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The key highlights are:

• UKW’s NAV per share increased by 1.6p or 1.2% during Q3 to 135.7p, with strong cash generation and higher power prices more than offsetting the impact of higher discount rates, the quarterly dividend, and depreciation.
• Electricity generation from the portfolio over Q3 was 2% below budget, although generation remains 3% above budget year-to-date. The team continues to expect both 2026 EBITDA (£560-660m) and net cash generation (£350-410m) towards the upper end of the guided range. Dividend cover projections remain at c. ≥1.7x for the year.
• Gearing has reduced to 41.1% from 41.7% at 30/06/2026. While gearing remains above the target of 40%, the team will be looking to reduce debt over time. Since the NAV date, UKW has refinanced £150m of debt due in 2027, and the total cost of debt has nudged below the 5.1% reported at June 2026.

Kepler View

Greencoat UK Wind's (UKW) model has been designed for resilience since the outset when it IPO’d in 2013. Since then, it has continued to deliver a dividend linked to UK inflation. Over the past couple of years, higher interest rates have tested the renewable energy infrastructure sector, and the strength of UKW’s model has seen it come through this difficult period without any scratches. It continues to pay an inflation-linked dividend (which yields 8.9% at the current price of 120p), continues to generate surplus capital, and it continues to repay and refinance its debt.

Ultimately, UKW’s ability to self-generate capital to reinvest is central to its resilience. At its simplest, because the investment returns UKW generates from its portfolio are greater than its dividend, it is able to recycle this surplus capital into accretive acquisitions which extend the life of shareholder’s future cash flows, or buybacks at wide discounts if the opportunity presents itself. At a recent capital markets event (for a video summary, click here) the team reiterated their belief that UKW would have between £900m to £1.4bn of excess capital to reinvest over the five-year period 2027-2031, and outlined the four types of accretive investment opportunities they will be evaluating.

UKW has clearly been a beneficiary of rising power prices – which have continued to rise since the NAV date. The effect on UKW’s revenues has been tempered by the Electricity Generator Levy, which saw 45% (and now 55%, since 01/07/2026) of wholesale revenues above c. £82 per MWh being paid to the UK government. Overall, UKW aims to retain a 50:50 balance of fixed and variable revenues over the long term. The team has a number of different ways to manage the balance of cash flows derived from the portfolio – through acquiring CFD-based assets, corporate PPAs, as well as short-term hedges. A combination of this management of fixed and variable cash flows, as well as accretive recycling of surplus cash, means that the team is confident they can continue to extend shareholder cash flows long into the future.

UKW’s shares have recovered somewhat, and now trade on a c. 12% discount. The team is optimistic that the electrification of the UK economy puts it in a good place to continue to deliver an inflation-linked dividend long into the future. There are political challenges ahead, but as the team continues to note, the consultations on wholesale CFD’s – allowing generators to exchange variable revenues for a fixed-price contract, could result in a win-win for both consumers as well as generators. In our view, UKW’s resilient model means the future is looking increasingly bright for the trust.

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As an aside, encouraging more women to invest is unquestionably a good thing, but titles such as Girls Just Wanna Have Funds aren't exactly helping the cause. How to Be a Rich Old Lady by Amanda Holden looked more promising - until it transpired it wasn’t that Amanda Holden and was rather more about asset allocation than the benefits of wearing very little on prime-time television.

Parking that searing insight, there was a certain irony in finding Personal Finance parked next to Paranormal. That said, building wealth through psychic powers may well offer better odds than some of the get-rich-quick schemes masquerading as investment wisdom.

Alas, the rest of us mere mortals are left to make the best decisions we can with the information available. The joy of writing this column is that my decisions are preserved in black and white, ready to come back and haunt me, so I'm revisiting a few of last year's convictions to see whether they’ve hit or missed the mark.

Are we paying too much for US exceptionalism?

Last December, I was wanging on about a possible AI bubble. That debate is still raging but NVIDIA (NVDA) has continued to confound the doom-mongers. Revenue growth of more than 100%? Tick. Beating analyst earnings forecasts for 15 consecutive quarters? Tick. Yet its share price has chalked up a rather more pedestrian one-year gain of just under 20%.

When I was pondering whether to take profits on NVIDIA a year ago, the analyst 12-month price target of 39% persuaded me to hold fire. Surely, sell-side caveats aside, analysts who live and breathe a sector know more about it than the average retail investor?  So I crunched the same numbers for the other big US tech names.

The answer is perhaps not, given the gulf between price targets and actual returns in both directions. Meta (META) and Microsoft (MSFT) barely made it into positive territory despite targets implying 30%-plus gains, while the reverse was true for Alphabet (GOOGL) and Apple (AAPL). So much for that particular crystal ball.

Fears over stretched valuations may persist, but strong earnings growth has significantly reduced some of the Magnificent Seven’s multiples since last December. NVIDIA’s trailing price-earnings ratio has fallen from 45x to 27x, with Alphabet dropping from 32x to 17x. While that doesn't necessarily make either a bargain, we do seem to be paying less for their exceptionalism than this time last year.

I’m hanging on to NVIDIA as my preferred play on chips but I’m going to leave the broader hunt for AI winners to the likes of Scottish Mortgage (SMT), Fidelity Global Technology and Landseer Global Artificial Intelligence.

Beyond the usual suspects

Emerging markets have long been cast as the Wild West of investing but that reputation feels very 2015. Volatility has fallen, central banks have earned their spurs in tackling inflation and I suspect Andy Burnham may be coveting the debt burdens of some of our emerging peers. Frustratingly though, strong economic growth hasn't always translated into stronger corporate earnings, particularly when share issuance has outpaced earnings growth.

But emerging markets had a cracking 2025, with the MSCI Emerging Markets Index delivering double the return of the MSCI World. More encouragingly, earnings growth did its fair share of the heavy lifting, rather than relying on improving sentiment. Forecasts should be taken with caution, but Bloomberg expects earnings per share for the MSCI Emerging Markets Index to double between 2025 and 2027.

That's a pretty compelling growth story if it comes off, so I’ve been topping up Invesco Pacific and Invesco Global Emerging Markets to increase my exposure to Asia and emerging markets. I’ve also added Artemis SmartGARP GEMs, thanks to its impressive track record of finding above-average growth at below-average valuations.

I do worry about another technology-related play given that TSMC and Samsung Electronics feature prominently among the top five holdings of all three funds. But there are some notable differences: Japan is the largest weighting in Invesco Pacific, while Artemis has more of a value tilt and limited portfolio overlap with Invesco GEMs. I'm taking the view that this is at least one step removed from the US AI trade, though it won't be immune if sentiment sours.

A different orbit

I'm trying not to put all my eggs in the same growth basket, so my latest two buys sit at opposite ends of the risk spectrum.

I bought Cordiant Digital Infrastructure (CORD) earlier this year as I like its buy, build and grow strategy. It has an impressive management team and a track record to match, chalking up an annualised NAV total return of 13.5% over its first five years, well ahead of its 9% target. The shares were caught up in the fallout from Digital 9, but the discount has since narrowed from around 40% to 20%. Investing in the infrastructure behind the AI boom seems to offer better odds than trying to pick the winners of the software arms race.

Seraphim Space (SSIT) is a different beast altogether. The trust invests in unquoted, growth-stage space technology companies, with exposure to mega-trends such as defence, cybersecurity and climate change. The discount has been all over the place, hitting a 50% premium in May before swinging to a 40%-odd discount in June, but hopefully it will deliver a bit of speculative stardust.

And that’s a wrap for the portfolio gazing. Will I still be banging on about the AI bubble this time next year? Quite possibly, but I’ll be back in the confessional booth to see if my growth-heavy portfolio has hit the buffers.

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These technologies may yet justify the sky-high expectations. But when investors are more focused on future potential than business fundamentals, returns can become increasingly dependent on a narrow group of winners. September offered a timely reminder of this: the S&P 500 fell just 0.5%, yet almost 80% of its constituents declined. Nearly half remain in negative territory year-to-date, with a small cohort of AI-related names doing much of the heavy lifting.

Nor is this simply a mega-cap phenomenon, with concentration within the Russell 2000 reaching its highest level since the dotcom era. According to JPMorgan, 17 of the 25 largest contributors to Russell 2000 returns in the two years to June 2026 were linked to AI, with quantum computing and space exploration accounting for much of the remainder. The companies may differ, but the market is still rewarding a narrow set of technology-driven narratives.

Investors don't need to bet against today's themes, but neither do they need to crowd into the same handful of fashionable narratives to find compelling opportunities.

Beyond the hype

The US mega-caps may have delivered impressive AI-fuelled earnings growth, but they’re not the only show in town. The Russell 2000 is forecast to deliver earnings growth of 55% and 30% in 2027 and 2028 respectively, compared with 17% for the S&P 500 in both years, according to research house Yardeni. With revenue growth expected to be more modest, these forecasts rely heavily on margin expansion but highlight the potential for earnings growth beyond the market's largest names.

Growth, however, is only half the story. The more pressing question is what investors are being asked to pay for it. The Russell 2000 is currently trading on around 22 times forward earnings, broadly in line with the Magnificent Seven. Yet this headline valuation masks a sharp divide, with growth stocks trading at around 38 times earnings compared with 16 times for value.

In recent years, investors have tended to fall into two camps, gravitating either towards companies offering explosive growth (often regardless of profitability) or towards cheaper value stocks, leaving quality-growth businesses occupying an awkward middle ground. These businesses are, in simple terms, companies that can be expected to get on with delivering steady growth without the fanfare of ‘big stories’. With investors focusing their attention elsewhere, their share prices may not fully reflect the strength of the underlying businesses, offering an attractive potential entry point.

Identifying these opportunities, however, requires careful stock selection. Regulatory changes have made it easier for unprofitable companies to list, while some larger, more established businesses are choosing to remain private for longer. JPMorgan US Smaller Companies (JUSC) aims to capitalise on these valuation inefficiencies by investing in high-quality companies with durable business models and sustainable cash flow, whose growth prospects are not fully reflected in their share prices.

Managers Don San Jose, Dan Percella and Jon Brachle combine more than 70 years of experience, supported by JPMorgan’s extensive research resources and regular meetings with company management. The result is a portfolio of around 100 holdings across a broad range of sectors, with individual positions capped at 5%.

The managers have continued to adapt the portfolio to changing conditions, adding around 30 holdings this year. These include profitable companies well-positioned to benefit from the capital expenditure supercycle, alongside commercial-stage biotechnology businesses. The aim is to capture structural growth opportunities without compromising on quality.

JUSC has delivered a total return of almost 100% over the past 10 years, together with positive returns in seven of the last 10 calendar years. More recently, however, its quality-focused approach has faced headwinds as investors have favoured unprofitable companies exposed to themes such as AI, cryptocurrency and quantum computing. While quality stocks can lag during small-cap rallies, the scale of the recent underperformance of the benchmark has been unusually pronounced, which we see as a potential opportunity for investors willing to take a longer-term view.

Better together

JUSC is preparing for a new chapter, having announced a proposed combination with fellow US small-cap trust Brown Advisory US Smaller Companies (BASC), following a strategic review by the BASC board. BASC shareholders can choose to roll their investment into JUSC, take cash or combine the two options.

We think the transaction makes sense for both sets of shareholders. Both trusts have a market capitalisation of under £200 million, meaning that a combined vehicle should improve liquidity in the shares, as well as the potential to reduce trading and holding costs.

The enlarged trust would benefit from a reduced management fee of 0.65% on the first £200 million of net assets and 0.60% thereafter. The board estimates that this would reduce annual fees by approximately 20 basis points for BASC shareholders rolling into JUSC and 13 basis points for existing JUSC shareholders.

We believe the investment trust structure is particularly well suited to the small-cap sector, allowing managers to invest in less liquid businesses and take a longer-term view without being forced to sell holdings to meet investor redemptions. JUSC also intends to manage its discount through share buybacks, alongside a continuation vote and conditional tender offer every five years.

Stories will always move markets, and today's technological revolutions may yet produce some of tomorrow's winners. But as JUSC's approach illustrates, investors don't have to buy into the hype to benefit from growth. Sometimes, the most compelling investments are those where the fundamentals are stronger than the story.

^{Performance figures based on share price total returns. Unless specified otherwise, data sourced as at 20/10/2026.}

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Hence, there are a lot of people who are going on the record to suggest we are close to seeing an almighty stock market crash, as bad AS or even worse than that seen at the turn of the millennium when the Internet was in its infancy.

It’s hard for ordinary investors to know how to take the pulse of markets, so we thought we’d dig into some publicly available data to help out. As ever, even if we are in a bubble, it’s impossible for any metric to predict when it will end.

None of these data points should be construed as any kind of advice, merely some helpful pointers to form one’s own opinion. If you are worried about markets and your exposure to them, we’d suggest seeking some form of financial advice, or coaching.

Prices and earnings

We’ll start with arguably the best-known measure of valuations, the price-to-earnings (PE) ratio. The PE tells you how much investors are willing to pay for every pound or dollar of earnings, or profits, a company, or index, makes. To make this calculation, you simply divide a company’s share price by its earnings per share (EPS).

Investors generally look at two different PE ratios: the trailing PE ratio and the forward PE ratio. The former tells us how much investors are willing to pay for past (usually last year’s) earnings, while the latter tells us how much they are willing to pay for future (usually next year’s) earnings.

These two PE ratios are telling us two very different stories. The trailing 12-month PE ratio on the MSCI World Index on 30/09/2026 was c. 22.7x. That’s significantly higher than its 10-year and 20-year average PE ratios, which, according to the website World PE Ratio, are c. 19x and 16x respectively.

A high PE doesn’t necessarily mean a stock or index is overvalued, but it does mean you’ll need much higher growth rates to profit. On a PE ratio of 22.7x, it would take you almost 23 years for the company to earn the equivalent of the share price, assuming the company or index’s earnings remain the same during that time.

That said, the MSCI World’s forward PE on the same date was c. 18x, which is pretty much in line with historical averages. Forward PEs are usually an average of the forecasts of all the analysts who publish investment research on a company. Valuations look more reasonable on a forward PE basis because those analysts think that aggregate earnings are going to be high in the future. Only time will tell if this turns out to be the case, or whether the AI rollout ends up being more disappointing than expected.

Near, yet far

Not straying too far from prices and earnings, the CAPE ratio is another popular valuation metric. The CAPE ratio stands for cyclically adjusted price-to-earnings ratio. If you’ll remember, the PE is a simple calculation: share price divided by EPS. CAPE is slightly different in that it divides the share price by its long-term (usually 10-year) average inflation-adjusted EPS.

Introduced by economists Robert Shiller and John Campbell in 1988, the CAPE ratio is generally seen as a more rounded indicator of a company’s earnings, since it averages them over a whole economic cycle and adjusts for inflation.

At a c. 26-year high, the CAPE ratio makes the US market look much pricier than its PE or forward PE ratios suggest.

Some will argue that the CAPE ratio is less relevant than it has historically been, since profit margins are higher than historically. It’s also another backward-looking metric that gives little credence to the fact that earnings are forecast to surge higher in the coming years.

A couple of other interesting observations are that European markets tended to track US markets pretty well historically but have lagged a lot ever since the financial crisis, potentially suggesting there’s some latent value hiding on the continent.

The UK, by contrast, has more often than not traded on a big CAPE discount to the US, except for times after a big crash, where its cheaper valuation provides more of a margin of safety. Again, today the discount looks historically large, potentially suggesting some value exists.

Playing with fire

In December 2001, legendary investor Warren Buffett said that the best single measure of where valuations stand at any given moment is the ratio of the total stock market capitalisation to gross national (or domestic) product (GNP or GDP). Ever since, the measure has been known as the Buffett Indicator.

Buffett once said: “If the percentage relationship falls to the 70% or 80% area, buying stocks is likely to work very well for you. If the ratio approaches 200% – as it did in 1999 and a part of 2000 – you are playing with fire.”

He also, of course, warned that the metrics, like all valuation measures, should never be used as an accurate gauge of valuation. Indeed, in the past six years, the metric has only been lower than where it was just before the dotcom bubble burst for a brief period in late 2022.

Still, it is very much higher than it has ever been and currently well above 200%; in fact, it’s not too far off 250%. Perhaps that’s unsurprising when there’s expected to be c. $10trn of investment into AI infrastructure between 2025 and 2032, an average of c. 3.6% of GDP per year, according to the Brookings Institution. That’s far larger relative to the economy than the major US canal, railroad, electrification, highway and telecommunications investment booms.

Relative valuations

So far, we’ve outlined valuations of stock markets outright, but there are, of course, other assets that investors can buy. Hence, relative valuations are also important.

Many investors compare the return they might get from investing in shares with safer investments where the return is pretty much guaranteed. In most cases, this investment is a bond issued by the US government, since it pays a return that is guaranteed as long as the US government doesn’t go bust and default, which is highly unlikely.

Here, we have a chart that compares stocks to bonds. It is known as the equity risk premium (ERP) and it shows the earnings yield on stocks minus the yield on government bonds. You can think of this as the extra amount that investors need to earn in order to compensate them for taking the extra risk of owning equities rather than bonds.

The earnings yield is somewhat analogous to the dividend yield in that it’s the return investors could get in the unlikely scenario where a company paid all of its earnings out to shareholders in the form of a dividend. Calculation wise, the earnings yield is, essentially, the inverse of the PE ratio: instead of dividing the share price by the EPS to get a ratio, you divide the EPS by the share price then multiply by 100 to get a percentage.

The chart below from Eco3min then subtracts the 10-year Treasury yield to get the ERP. As you can see, while it’s not quite on par with the dotcom bubble, where the 10-year yield was almost three percentage points above the earnings yield, it’s very much in negative territory. This would suggest that, all things being equal, bonds potentially look more attractive.

Too much skin in the game

This one is less a measure of valuation but more of sentiment towards stock markets. It shows the vicissitudes of investor keenness for investing in equities and can be a useful indicator for knowing when we’re hitting peak exuberance levels. Valuation alone is not a good judge of when things might tip over the edge.

To make the point, we’ll back up to New Year’s Eve 1990. At this point, equities accounted for just under 15% of all the financial assets held by American households and non-profit organisations – a historically low number. Over the next 10 years, the S&P 500 returned 431% in both US dollar and pound sterling terms.

Fast-forward to the turn of the millennium, New Year’s Eve 2000, and the percentage of household wealth tied to equities had risen to almost 40% as stocks had risen inexorably. In the next three years, the S&P 500 lost almost 50% of its value.

Something similar had happened through the 1970s and, undoubtedly, similar will happen again. Our data shows that households and non-profit organisations have never had so much of their financial assets tied to the stock market – almost 50%, as of 01/03/2026.

Having said that, investing is a hell of a lot more accessible – not to mention cheaper – than it has ever been, so the proportion of share ownership probably should be meaningfully higher than it has been in the past.

Conclusion

Overall, we’d suggest a mixed picture in terms of valuation. The CAPE ratio and Buffett Indicators would suggest we’re very much in overvalued territory, but they also show that we have been for quite some time and things have yet to move.

In addition, while more people than ever are invested in stocks, this rationally makes sense given the ever-lower barriers to investing these days. In addition, when we pivot towards forward-looking valuation metrics, things look more sanguine (assuming the earnings growth that is currently forecast comes through).

Again, we’re putting these metrics together so that readers can make their own judgements around valuations. That said, David Swensen, the late head of Yale’s hugely successful endowment fund, put the failure of individual investors during the dotcom bubble down to a lack of rebalancing.

If they’d sold overvalued stocks and recycled the cash they’d raised into underperforming bonds, they would have had a much better outcome when the crash came. Some food for thought, perhaps.

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