Global markets were largely flat in November after the prolonged US government shutdown created uncertainty around economic data and growth, as well as the trajectory of monetary policy all weighed on sentiment. The International Growth Fund declined –0.8%, versus the benchmark –0.2%.

The third-quarter earnings season was strong, with 81% of companies in the US S&P 500 Index surpassing expectations with an earnings growth of +13% year-over-year. Technology companies were particularly strong, with earnings expectations for the Magnificent Seven increasing to 22% compared to 15% seven months ago. Despite strong results, the US market only rose +0.2% in November as doubts about high valuations and optimistic profit expectations in the AI ecosystem limited further gains. These doubts saw technology stocks underperform within defensive sectors such as healthcare - a reversal of the wider trend seen throughout the year. European equities (+1.1%) slightly outperformed the US, supported by continued strength in financials and IT, and a robust earnings outlook for 2026 with less technology concentration.

The recent months have reminded us how quickly sentiment on stocks can change, even if the underlying earnings power of the business has not. All three of our top performers this month had been detractors from performance in prior months. Alphabet (+14%) continued its recent performance into November as it is increasingly seen as a leader in the AI race, with dominant positions across the whole AI value chain. This month, Google launched Gemini 3, its latest artificial intelligence model, to high acclaim – with Salesforce CEO Marc Benioff singing its praises. This model was trained using Google's internal semiconductor chips (or TPUs), creating a possible alternative to Nvidia GPUs in some use cases. And with companies including Meta and Anthropic both signing deals to use Google’s TPUs this creates a further revenue tailwind for the business. That said, we appreciate that the AI market is a dynamic and fast-moving space and have reduced our position size given the outperformance.

Zoetis (-11%) fell as earnings came in below expectations, with the company facing a combination of macroeconomic and competitive headwinds. While two competitive product launches over the past twelve months have been a headwind, actual market share losses have been limited. However, Zoetis’s new flagship pain drug Librela is facing slower-than-expected growth due to social media concerns around safety (despite positive data from real-world outcomes). Combined with increasing macroeconomic headwinds, near-term growth is below our original expectations, prompting us to reduce our position size. With a steady pipeline of new drugs and an eventual return to growth in vet visits, we expect growth to accelerate over the medium term.