Q2-2025 proved to be a remarkably strong quarter for risk assets, even as rising geopolitical tensions cast a shadow over global financial markets. June saw a significant escalation of Middle East tensions following US strikes on Iran's nuclear facilities. Despite this, and the ongoing global uncertainty fuelled by President Trump's tariff policies, financial markets maintained surprising stability. A reciprocal tariff pause, initiated by President Trump earlier in the quarter, provided a much-needed boost to most major equity markets. In the US, the S&P 500 Index delivered 10.8% for the quarter, while the tech-heavy Nasdaq Composite Index surged 18.0%. The Euro STOXX 50 Index (measured in euro) posted 2.7%. Emerging market equities rallied 12.0% (in US dollars) largely driven by strong performances from Taiwan and South Korea. However, the bond market painted a slightly different picture. US government bonds (ICE BofA US Treasury Index) managed a modest 0.8% gain, amid growing concerns about US fiscal health. A Moody's ratings downgrade and President Trump's expansive fiscal bill left US bond market participants increasingly uneasy. South Africa delivered a strong showing during the quarter. The FTSE/JSE All Share Index climbed 10.2% (in ZAR terms), primarily fuelled by strong performances from technology and telecommunication shares. The FTSE/JSE All Bond Index also saw a significant gain of 5.9%. Several factors contributed to this optimism: low inflation, a 25-basis point rate cut by the South African Reserve Bank (‘SARB’), speculation about a potential reduction in South Africa's inflation target, and discussions around the country's possible removal from the Financial Action Task Force (‘FATF’) grey list. These positive developments helped the rand strengthen 3.4% against the US dollar.

Against this backdrop, the H4 Stable Fund (‘the fund’) was up 5.4% in the quarter. Portfolio activity earlier in the quarter included increasing exposure to SA bonds and equity, while reducing the US bond allocation. Later in the quarter, we trimmed the SA bond position as yields fell. The fund continues to hold a diversified mix of local and offshore assets that the manager deems appropriate considering the current investment climate.