3rd quarter 2025 report

The three arguments put forward in the conclusion of the last report have proven to be relevant over the past few months. We have seen the US dollar stabilise since the end of June, as well as a slight and slow recovery (+1% on the dollar index). The small and mid-cap stock market index has risen by 12% since the summer (Russell 2000). Digital currency levels have confirmed the positive news of recent months regarding the widespread adoption of these assets by companies and legislative progress in the US and around the world. Bitcoin has risen by more than 6% over the last quarter.

To date, and since the beginning of October, these trends have been confirmed and are accelerating. Portfolios have grown significantly since last June, posting a performance of more than 10%.

There is one key factor in market developments that has been resurfacing in recent months, namely US monetary policy and changes in its money supply (M2), which reflects the creation of liquidity by the central bank and commercial banks. When M2 increases significantly, it influences real assets, as these directly represent their value in relation to a currency that is devaluing due to the increase in its quantity:

Last June, the level of 22 trillion dollars was exceeded. By comparison, M2 in 1959 was 286 billion. A striking example in this context is the value of gold relative to the US dollar over the past 10 years.

The same is true if we look at stock market indices and Bitcoin. This recurring monetary phenomenon stems from the chronic budget deficits that the US government has been running year after year. These deficits fuel public debt. To refinance itself, the government issues bonds, which are purchased by the central bank and commercial banks through money creation. We could therefore conclude that it is not gold or the stock markets that are rising, but rather the reference currency that is depreciating.

In addition, the FED (US central bank) is beginning a cycle of lowering benchmark interest rates. This makes real financial assets even more attractive.

Stock markets

Small and mid-caps outperformed large caps during the last quarter:

RUSSEL 2000    +12%

SP500        + 8%

The fall in US interest rates gave an additional boost to stocks that pay little or no dividends. It is therefore wise to stick with SMEs and thus benefit from a catch-up effect compared to large caps.

Digital currencies

There is a lot of interesting news regularly appearing about the implementation of guidelines for investing in digital currencies and in the various economic activities directly related to them. The main ones are tokenisation (converting an asset into a digital token that can be transferred on the blockchain network), the transfer and management of stablecoins (digital US dollars that can be transferred on the blockchain network in a matter of minutes), and the implementation of smart contracts (contracts that automatically execute their terms on the blockchain network).

Companies that create reserves in BTC and ETH continue to accumulate them. Digital currency ETFs continue to grow, and the SEC (Security Exchange Commission) is set to authorise new investment vehicles for other digital currencies in the coming weeks. A few days ago, the United Kingdom authorised the processing of digital currency investment vehicles on its official stock exchanges.

Adoption continues and is accelerating, with cryptocurrencies finally being considered as a financial asset in their own right, enabling them to play a ‘diversification’ role within portfolios.

Conclusion

Stock markets are being buoyed by developments in high technology, particularly infrastructure for artificial intelligence (microchips and computer data storage capacity). Given the monetary outlook, it is highly likely that stock market indices will continue to rise in the coming weeks. Depending on the extent of the rise, it would be wise to reduce exposure to equities because, despite the favourable environment, current valuations (price-to-earnings ratios, price-to-book ratios, etc.) are historically high.

When it comes to investing, patience often pays off more than action. This is especially true when markets are trending upwards.

I wish you a wonderful autumn.

Yours sincerely 

Steve Dubied,

Financial Analyst

mAJor EVENTS

What are the events of today that can change the course of history?

Blockchain technology (preserving purchasing power, immutability, freedom, convenience, savings, speed)

Artificial intelligence (exhaustive compendium of knowledge, speed of deduction, predictions based on serial history)

Quantum computing (ability to solve complex problems in a very short space of time. The ability to elucidate answers to physical, mathematical and cryptoraphical questions in the very short term, which today would require years of computing power)

Western hegemony facing the whole world (Western capitalism is spreading around the world under different political systems. Some countries have developed a dirigiste capitalism and want to assert their difference from a system that in essence promotes entrepreneurial freedom. Culture, morality, religion and security all come into play and tend to create a divide)

A society with selective economic growth (Technological advances are cannibalising entire swathes of activity in various economic sectors. There is an increasing concentration of activity and revenue in the technology sector, to the detriment of other sectors, which are being forced to restructure)

A radicalisation of political ideas and convictions (every political party that loses ground becomes radicalised, ideology becomes a substitute for maintaining support despite failure)