Markets continue to face a challenging combination of rising bond yields,persistent inflation pressures and uneven economic performance. Whiletechnology and semiconductor-related companies have continued to benefit from strong artificial intelligence-driven demand, weakness across cyclical andconsumer-sensitive sectors suggests that economic conditions remain mixed. Higher interest rates and elevated energy prices may continue to createperiods of volatility in the near term. Nevertheless, the portfolio remains focused on businesses with durable competitive advantages, strong balancesheets and favourable long-term earnings drivers. Portfolio positioningcontinues to emphasise quality, profitability and exposure to structural growththemes while remaining selective in sectors facing increasing margin or valuation pressure.

Portfolio performance reflected the increasingly narrow leadership within equity markets. While exposure to selected technology and healthcare holdings provided support, these gains were more than offset by weakness across financials, software and industrial holdings. Rising interest rates and higher discount rates weighed particularly heavily on sectors with borrowing cost and general consumer exposure such as Blackstone and McDonald’s

The decision followed concerns regarding the deterioration of forward profitmargins as rising input costs increasingly affected operating profitability. Diesel and energy-related inflationary pressures were beginning to weigh on future earnings expectations, reducing the attractiveness of the risk-reward    profile relative to other opportunities within the      portfolio.