Monday Club – 09/02/26: Your weekly Wealthwise digest

Investment round-up

Equity funds outflows

Tensions over Greenland drove a flight from equity funds in January, which saw outflows of £697m, according to Calastone data. This extends the bout of net selling to an unprecedented eighth consecutive month. European and UK equity funds bore the brunt of selling, with other regions largely unaffected.

Liontrust’s Milburn to retire

Phil Milburn, head of rates within Liontrust’s multi-asset team, has announced he will retire at the end of July. The group said Milburn was retiring for health reasons, with his responsibilities to be absorbed by the wider fixed income team. He had been with the group since January 2018.

Morningstar expands ratings to MPS

Morningstar has expanded its ‘Star Ratings’ service to UK managed portfolios, allowing users to benchmark portfolios independently. The launch also includes category averages, which allow direct peer-to-peer comparison across UK managed portfolios.

IA amends property sectors

The Investment Association has unveiled updates to its UK Direct Property and Property Other sectors after a review. The trade body has created two new fund groupings: a Listed Property and a Direct and Hybrid Property sector.

Herald cancels tender offer

Herald Investment Trust has cancelled a tender offer after major shareholder Saba Capital Management voted against it. The offer had given shareholders the chance to tender 100% of their shares.

European PE fundraising slows

European private market firms’ fundraising slowed dramatically in 2025. According to data compiled by Morningstar and PitchBook, private equity fundraising in Europe hit a decade low in 2025 after a record high in 2024, dropping by 40% year-on-year.

Pinnacle ups stake in PAM

Pinnacle Investment Management has increased its stake in Pacific Asset Management for $419m. The deal will take Pinnacle’s stake from 21% in 2024 to 100%, subject to regulatory approval. … and the week that will be

In focus: Rebalance of powers

Unsettled by the Trump administration’s often chilly attitude towards the US’s traditional allies, Western leaders are increasingly turning to China in a bid to protect their economies. The US president’s fondness for the ‘tariffs as blackmail’ playbook has seen leaders make hasty trips to Beijing, aiming to ensure they can sustain access to key technologies and are not left vulnerable by the whimsy of the White House.

A similar phenomenon can also be seen within financial markets, where there are increasing questions over the strength of the US’s currency, bonds and tech giants. While there has been no wholesale selling, prices have looked more vulnerable as last week’s jitters in the technology sector demonstrated. So should investors be taking note and rethinking the balance of the superpowers in their portfolios?

On economic growth, the two countries are surprisingly close. The IMF is forecasting growth of 4.5% for China in the year ahead and just 2.4% for the US. That said, US GDP growth was running at 4.4% in the third quarter of 2025. China GDP has caught up significantly with the US in recent years – now sitting at $19,200bn (£14,000tn), having been at $11,300bn a decade ago. Overall US GDP is $29,500bn. In 2015, it was $18,300bn.

Of greater importance for investors is the disparity between their representation in stockmarkets. China now makes up 17.65% of the world economy but just 3% of the MSCI ACWI index. In contrast, the US is 27.49% of the world economy but 63% of the market capitalisation of that index. China’s domestic market capitalisation may have doubled in a decade but the US stockmarket has seen far greater rises. This suggests there is a potential catch-up trade for China as its capital markets develop.

In the short term, momentum is with the Chinese market. The Shanghai Composite is up 23% over one year and 2.4% since the start of 2026. The S&P 500 is up just 15% over one year and 1.3% for the year to date. For the Hang Seng, the figures are 25.7% and 3.63% respectively.

The US market has become highly unbalanced, significantly weighted to AI. The S&P 500 has almost 40% in its top 10 stocks, all of which are technology names except Berkshire Hathaway. True, China is also heavily weighted to technology – with Alibaba and TenCent forming almost 30% of the MSCI China between them – but there is a better sector split in the Chinese index, with consumer, communication and financial stocks all as important as technology.

For Edmund Harriss, chief investment officer at Guinness Global Investors, it is clear China has a better grasp of the future. In his view, the US is looking backwards – trying to replicate all those things that made postwar America great – whereas China is looking at where it wants to be in the 2040s and 2050s. “The US is looking at domination in fossil fuels, in the internal combustion engine,” he explains. “They are looking at sustaining all those things that made America great in the 1950s and 1960s. China is looking ahead.”

Harriss believes this is particularly evident in Chinese spending on renewables, which is around three times that of the US. Highlighting the country’s open-sea solar farms as a sign of its innovation drive, he adds that China is also leading the way on industrial automation and high-end manufacturing.

“This keeps them ahead,” he continues. “In the geopolitics of today, it is the aphorism of ‘Don’t interrupt your enemy when it is making a mistake’. While the US is making a noise, China can just sit this one out.

“China knows where it is going and it is looking 20 years ahead. America also knows where it is going but it is looking in the rearview mirror. If you are thinking about where to put your money over the long term, with fundamental growth drivers and competitive and first-mover advantages, Asia starts to look very interesting. When you look at relative valuations, the calculation then becomes even easier.”

Nevertheless, China has problems the US does not. Its focus on certain industries such as electric-car manufacturing has led to oversupply, which makes it difficult for companies to make money. Still, Chinese policymakers would appear to be aware of the problem and have launched the country’s ‘anti-involution’ strategy to address it.

“There are early signs certain sectors are beginning to break out of the price-profit squeeze,” says Fang Lui, Asian economist at Edmond de Rothschild. “These developments suggest market-driven players with entrepreneurial spirit – technological depth, innovation, brand value and so on – are better positioned to withstand competitive pressures and protect profitability.” She also believes industry competition could trigger a wave of mergers, where larger players acquire smaller firms to restore margins.

China has also been over-reliant on the property market as a source of growth. This has held back consumption as the problem has unwound. Guinness’s Harriss believes, however, the impact of property-market weakness on economic growth is waning and should neutralise towards the end of this year.

Either way, Rathbone Global Opportunities manager James Thomson cautions that investors write off the US at their peril. “US exceptionalism will remain in place for the foreseeable future”, he says, pointing to lower tax rates, higher research and development spending and the availability of venture capital funding as factors that can sustain the US’s structural advantage.

Thomson also argues the US has a raft of “mission-critical” businesses that are able to set their own prices. “There are a range of US companies that have real pricing power,” he elaborates. “I cannot live without Microsoft Office and my Amazon Prime subscription and my kids can’t live without Netflix – so these are all price increases that need to be accepted by the consumer.” There are no significant challengers to any of these companies, he adds – indeed they do not exist anywhere else in the world.

Thomson does concede the US market has been “all about technology” and is unlikely to repeat the same kind of outperformance witnessed over the past decade. So, while he does not believe the US market is about to slide, he accepts it is “too concentrated and needs to roll out”. In the last technology bubble, he continues, it was not unusual to see 8% to 10% corrections along the way and, while that has yet to happen this time, it would not be surprising if it became a feature of markets looking forward.

For now, though, the US economy continues to look decidedly unbalanced. Increasingly, wealth is focused on the upper echelons of society, with Moody’s Analytics reporting that 10% of consumers account for 49% of consumption. This creates fragility – particularly if AI starts to eat white-collar jobs.

In contrast, China is already seeking to address the potential problems stemming from the growth of AI. According to Guinness’s Harriss, for example, younger children are now being educated in different ways, with AI and tech-learning part of the curriculum from the age of six.

Furthermore, the US is already behind in securing certain commodities. China has spent years building a stranglehold in critical minerals so JD Vance’s attempts to create a new critical mineral trading bloc and coordinate pricing floors, announced last week, all feel ‘too little, too late’. The US vice-president pointed out that China has maintained 70% of the world’s rare earth mining, uncovering the critical minerals used in smartphones and cars, while the US has just 12%. It is not clear the US will be able to turn this around.

Clearly there are arguments on both sides for an allocation to the US and China. The difference is, any investor with global exposure will already have significant weighting to the US while allocations to China are still relatively small. The time looks ripe for a rebalancing.

Read more on this from Allianz here, from Fidelity here, from the FT here and from Guinness here