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UMAP Posts

Asset Allocation update – November 2025

We have seen a softening in market momentum led by US equities and based around two factors. Firstly, there are reduced expectations for an interest rate cut in the aftermath of the October’s Federal Reserve (Fed) meeting.

Post the event, Fed Chair Jerome Powell stated that a December cut was not a ‘foregone conclusion’ and per Fed Fund Futures the probability of a December cut fell from 100% in late October to under 40% by mid-November.

Secondly, the recent round of mega cap tech earnings reports has shown that while businesses are generating huge revenues, the scale of their artificial intelligence (AI) investments is causing some concern. The market appears to be becoming more discerning on the size of capital expenditure, with more scepticism emerging over the likely returns on investments. Equally, the shift from cashflow-funded investment to a mix including additional borrowing appears to have impacted sentiment.

While the overall move lower is relatively minor in the broader scheme of things, the pause and subsequent reversal serve as a reminder that markets do not go up in a straight line. As with every other market theme, winners and losers will emerge. While AI may well be transformative over time, not every company investing billions will reap the rewards for which they strive.

Overall, we remain constructive on the basis that economic fundamentals are benign, earnings growth expectations are solid and even if we do see a Fed ‘pause’ in December, the direction of travel for US interest rates is still lower.

At a glance – equities and fixed income

Equities

We remain mildly positive on equities. The recent earnings season was positive, with a broadening of growth in US equities, strong growth in Japan and an improvement in emerging markets. We remain mindful that, even with the recent slowing in momentum and mild pullback in markets, valuations are still towards the ‘rich’ end of the spectrum. Given our positive economic outlook, likely lower interest rates and expectations for positive earnings growth, we still see the strongest opportunities in equities.

Fixed income

We maintain a neutral stance on bonds. We continue to see some volatility in government bonds – moves triggered by heightened concerns over debt levels and fiscal deficits. The monetary policy backdrop remains supportive as interest rates gradually come down, though we note that at some point rates in Japan will go the other way. Valuations are not compelling across investment grade and high yield segments, which alongside emerging market bonds offer spreads at the very bottom of historical ranges.

Recent asset class changes and views

European equities

We remain neutral on European equities but are cognisant that the direction of travel appears more positive as we look towards next year. The asset class performed strongly in the first half of 2025 with excitement around potential fiscal stimulus. Optimism was led by developments in Germany as reforms to the ‘debt brake’ looked set to unleash significant spending on defence and infrastructure. However, by mid-year market patience had worn thin and the outperformance of stocks was eroded. All the same, we believe that patient investors may well be rewarded in 2026 as stimulus begins to have an impact. Any improvement in German growth would also likely have a positive ‘halo effect’ on wider Europe, and earnings expectations are moving higher as a result.
Strongly dislikeStrongly positive

Asset Allocation Matrix

MATRIX
Asset Allocation
Equity
Mildly Positive
Rates
Neutral
Credit
Neutral
Property
Mildly Positive
Commodities
Neutral
Gold
Neutral
Cash
Mildly Dislike
Equity Regions
US
Mildly Positive
Europe ex UK
Neutral
UK
Neutral
Japan
Neutral
APAC ex
Neutral
EM
Positivo
Fixed Income (*=Spreads)
Nominal
Neutral
Real Rates
Neutral
EM Local
Mildly Positive
IG*
Mildly Positive
HY*
Neutral
EM Hard*
Neutral
Currency
USD
Neutral
EUR
Neutral
GBP
Neutral
JPY
Neutral
EM FX
Neutral
STRONGLY DISLIKE
DISLIKE
MILDLY DISLIKE
NEUTRAL
MILDY POSITIVE
POSITIVE
STRONGLY POSITIVE
Asset Allocation
Equity
Mildly Positive
Rates
Neutral
Credit
Neutral
Property
Mildly Positive
Commodities
Neutral
Gold
Neutral
Cash
Mildly Dislike
Equity: Regions
US
Mildly Positive
Europe ex UK
Neutral
UK
Neutral
Japan
Neutral
APAC ex
Neutral
EM
Positive
Fixed Income (*=Spreads)
Nominal
Neutral
Real Rates
Neutral
EM Local
Mildly Positive
IG*
Mildly Positive
HY*
Neutral
EM Hard*
Neutral
Currency
USD
Neutral
EUR
Neutral
GBP
Neutral
JPY
Neutral
EM FX
Neutral

Source: Columbia Threadneedle Investments, as at 11 November 2025.

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Important information

Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

For professional investors only.

This financial promotion is issued for marketing and information purposes only by Columbia Threadneedle Investments in the UK.

The Fund is a sub fund of Columbia Threadneedle (UK) ICVC III, an open ended investment company (OEIC), registered in the UK and authorised by the Financial Conduct Authority (FCA).

English language copies of the Fund’s Prospectus, summarised investor rights, English language copies of the key investor information document (KIID) can be obtained from Columbia Threadneedle Investments, Cannon Place, 78 Cannon Street, London, EC4N 6AG, email: [email protected] or electronically at www.columbiathreadneedle.com. Please read the Prospectus before taking any investment decision.

The information provided in the marketing material does not constitute, and should not be construed as, investment advice or a recommendation to buy, sell or otherwise transact in the Funds. The manager has the right to terminate the arrangements made for marketing.

Financial promotions are issued for marketing and information purposes; in the United Kingdom by Columbia Threadneedle Management Limited, which is authorised and regulated by the Financial Conduct Authority; in the EEA by Columbia Threadneedle Netherlands B.V., which is regulated by the Dutch Authority for the Financial Markets (AFM); in Switzerland: Issued by Threadneedle Portfolio Services AG, Registered address: Claridenstrasse 41, 8002 Zurich, Switzerland. In the Middle East: This document is distributed by Columbia Threadneedle Investments (ME) Limited, which is regulated by the Dubai Financial Services Authority (DFSA). For Distributors: This document is intended to provide distributors with information about Group products and services and is not for further distribution. For Institutional Clients: The information in this document is not intended as financial advice and is only intended for persons with appropriate investment knowledge and who meet the regulatory criteria to be classified as a Professional Client or Market Counterparties and no other Person should act upon it.

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Threadneedle Asset Management Limited, No. 573204 and/or Columbia Threadneedle Management Limited, No. 517895, both registered in England and Wales and authorised and regulated in the UK by the Financial Conduct Authority.   Columbia Threadneedle Investments (Columbia Threadneedle) is the global brand name of the Columbia and Threadneedle group of companies. © 2026 Columbia Threadneedle. All rights reserved.    
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