There are two quotes that spring to mind when considering the current stock market. ‘Markets can remain irrational longer than you can remain solvent’ is widely attributed to John Maynard Keynes, while Warren Buffett wrote ‘In the short run, the market is a voting machine, but in the long run, the market is a weighing machine.’
While Keynes is most widely known as a hugely influential economist, he also has a formidable reputation as an investor. He recognised that markets can go through prolonged periods of irrationality, and as a consequence, it is wise to invest in financially-sound companies and not use too much debt. Buffett, arguably the world’s greatest long-term investor, tried to explain the source of the irrationality: in the short run markets are driven only by money, not intelligence or emotional stability, but in the long run, the market weighs the stock so that the share price reflects its true value.
The relevance of the quotes is that during the calendar year to date (30 November), the FTSE 100 index has recorded a total return of 23.0%. This is obviously a substantial gain, but is mostly a re-rating, certainly not backed by growth in earnings, cashflow or dividends. By contrast, the FTSE 250 index has only gained 11.1%. By any historic standard, this is an exceptionally large gap between the performance of large- and mid-sized companies. We believe this difference has been driven mostly by the weight of money, as investors have sold medium- and smaller-sized companies in order to buy the larger companies. We don’t believe in investing on the basis of the size of company, but prefer to invest on the basis of value, recognising that when the market once again returns to its weighing mode, prices of shares outside the very largest companies should respond positively.
During November, the FTSE All-Share continued its run of positive performance with a total return of 0.4%. The Trust outperformed, returning 1.5%. The share price of Beazley was weak (-14.3%) during the month as some investors took fright at the company’s plan to invest $500m in Bermuda. We are not so concerned as we see this as a good investment to develop a platform for future growth.
As at 30 November 2025
Investment risks
The value of your investments and any income from them can go down as well as up and you may not get back the original amount invested. Gearing is used for investment purposes to obtain, increase or reduce exposure to an asset, index or investment. The mention of any stocks and bonds is not a recommendation to deal. All information is sourced from Columbia Threadneedle Investments, unless otherwise stated.
Issued by Columbia Threadneedle Management Limited and approved for distribution 11/12/2025.
