Commentaries

Global Equity ETF Commentary

Global Equity ETF Commentary

Market Overview

As of September 30, 2025

Shaking off the second quarter’s volatility, equity markets marched steadily higher throughout the third.

Though risk and uncertainty remained in ample supply during the summer, stocks continued to rebound off their April “Liberation Day” troughs as investors cheered continued artificial intelligence (AI) spending and the prospect of Federal Reserve easing. For the quarter, the S&P 500 Index gained 8.1%, led to new record highs by the market’s tech-oriented growth names. The MSCI EAFE Index returned 4.8% in the third quarter but maintains a year-to-date advantage of more than 1,000 basis points over US stocks.1

Market Valuations Suggest Lofty Expectations, Particularly in the US

At the risk of sounding like a broken record, we’ll again point out that risk perception in the US markets appears quite low. Equity market valuation multiples are rich, high yield spreads are tight, implied volatility is low, and the price ratio of growth to value stocks is near its all-time high.2

In short, we think it’s fair to characterize the appetite for risk in the US as full—which is not to say market prices have no foundation in reality. Earnings growth forecasts remain constructive, driven by factors ranging from the impact of the AI capex cycle to fairly accommodative fiscal conditions. In terms of the latter, the rate of growth in government spending and the size of its debt continue to exceed wage growth, imparting some positive nominal drift to the economy that has trickled down into expectations for corporate earnings and margins expectations. At the same time, short-term interest rates have moved lower following September’s widely expected 25 basis point reduction in the federal funds rate, and markets are pricing in an additional 50 basis points of cuts by year-end.3

Similarly constructive dynamics have emerged in non-US economies, beckoning the return of animal spirits to markets sorely in need of a boost and helping to drive the relative outperformance on non-US equity markets year to date. In Europe, for example, Germany has taken steps to leverage its ample fiscal capacity, notably on defense and infrastructure projects,4 and NATO countries as a whole agreed to raise annual defense spending to 5% of GDP by 2035.5 China’s multiyear debt-restructuring initiative for local governments— earmarked at 12 trillion yuan—appears to be bearing fruit, enabling local authorities to clear arrears to suppliers rather than debt service.6 In Japan, the country’s likely next—and first female—prime minister has a reputation as a pro-spending conservative who also favors stimulative monetary policy.7

Considerable weakness in the dollar over the course of 2025—the ICE US Dollar Index is down nearly 10% year to date—has further supported the outperformance of non-US equity markets. Still, it wasn’t until this year that the MSCI EAFE Index broke through its 2007 peak.8 The MSCI EAFE is trading around 17x trailing earnings—not cheap but well within the realm of normal, from our perspective, and certainly less rich than the S&P 500’s 28x.9 And while it has pulled back marginally, the price ratio of US equities to non-US stocks stands at more than 2.5 times the average since 1970.10

Unusually, Gold and Equities Have Surged in Tandem

An interesting feature of the financial markets over the past several quarters has been the concurrent rally in equities and gold prices. Gold’s year-to-date gain of nearly 50% puts it on an annual pace not seen in nearly 50 years, as central banks and investors alike have piled into the metal amid elevated risks and the potential for currency debasement. More recently, we’ve also seen other precious metals— including silver and platinum—break out to the upside.11

Historically, equities and gold have both participated in the nominal drift of the global economy, but they typically have done so in a countercyclical manner, as gold has tended to thrive in conditions less supportive of equity investment. There have been exceptions, however, perhaps most notably during the early 1970s. This period was characterized by the fiscal pressures of the Vietnam War, the end of the Bretton Woods gold peg and executive branch pressure on the Fed to ease interest rates despite inflation pressures, a combination of factors that contributed to monetary disequilibrium and a decade of stagflation.

While we don’t want to overstate the historical analogies, there are some evident parallels between that period and the current environment, including the fact that the US appears to be a long way from home base in terms of monetary and fiscal settings. For example, we wouldn’t expect the federal government to be running at a substantial fiscal deficit over the past several years—including just shy of 6.0% of GDP in the recently completed fiscal year—with sub-4.5% unemployment levels.12 Meanwhile, Trump is pressuring the Fed to lower the federal funds rate while the fiscal imbalance remains unaddressed and geopolitical tail risks have only grown fatter.

Tending the Garden

Strong markets can create a dilemma for portfolio managers; while you want to let your roses bloom, you must remain true to your investment discipline. Viewing our portfolios from the bottom up, we have looked for opportunities to recycle capital, trimming more successful positions to take advantage of other opportunities in sectors or geographies that have been out of favor.

Of course, the world remains rife with risk, including massive sovereign debt loads, geopolitical frictions and political strife. While an increase in the market’s perception of these risks would likely impact both US and international stocks, international markets in general appear to be priced with less expectational risk compared to the US, given current valuations. Regardless, we expect our investment discipline to support our efforts to provide long-term real returns while avoiding the permanent impairment of capital.

Portfolio Review

Global Equity ETF posted a return of 1.80% in third quarter 2025. All regions contributed to performance; North America and emerging markets were the leading contributors while Japan and developed Asian excluding Japan lagged. Materials and industrials were the largest contributors among equity sectors, while consumer staples detracted and real estate was flattish. The Global Equity ETF outperformed the MSCI World Index in the period.

Leading contributors in the First Eagle Global Equity ETF this quarter included Oracle Corporation, Alphabet Inc. Class C, Samsung Electronics Co Ltd Pfd Non-Voting, Barrick Mining Corporation and Newmont Corporation.

Oracle is one of the world’s largest independent enterprise software companies. The company reported a large increase in backlogs during the quarter, including a substantial, five-year cloud-computing contract with OpenAI. In addition to a significant near-term lift to Oracle’s top line from this contract, we expect margins on these revenues to expand over time.

Shares of Alphabet, the parent company of Google and YouTube, were strong during the quarter as the Department of Justice delivered favorable rulings on embedding Chrome as the default browser on phones and retaining the company’s current corporate structure with no need to divest divisions. Beyond its core ad and search businesses, Alphabet provides a full stack solution within AI: spanning research, infrastructure/data centers and integrated end products. Valuation remains reasonable, in our view, and the company continues to share its ample store of cash with investors through dividends and buybacks.

Samsung Electronics is a global technology company with leadership positions in smartphones, televisions and semiconductor memory, and is a major manufacturer of electronic components including lithium-ion batteries, semiconductors, image sensors, camera modules and displays. Shares rallied during the quarter on continued strong dynamic random-access memory (DRAM) pricing due to tight supply and surging demand for AI-driven cloud-infrastructure builds. After the quarter’s end, Samsung announced a partnership with Nvidia to supply DRAM chips for its next-generation products.

Canada’s Barrick Gold is the world’s second-largest gold producer. For its most recent quarter, Barrick reported operating and financial results in line with expectations as well as strong cost containment and a transition to a net-cash position. It also announced a significant, low-cost, gold find at its Fourmile field in Nevada. Within the context of strong results and the sizable Nevada discovery, investors were unfazed by the unexpected departure of the company’s CEO.

Newmont is one of the world’s largest gold miners and a major producer of silver. Newmont continued to deliver into both cost and production guidance during the quarter—undiminished by usual seasonality—resulting in record free cash flow generation. As part of its portfolio rationalization plan, Newmont monetized stakes in Greatland Resources and Discovery Silver in June and July, respectively, and sold its stake in Orla Mining in September; proceeds were applied to reducing debt and buying back shares. Meanwhile, investors appeared to take changes to Newmont’s executive suite—including both the unanticipated resignation of its CFO in July and the announcement of long-anticipated succession plans for its CEO—in stride.

The leading detractors in the quarter were Elevance Health, Inc., Philip Morris International Inc., Shimano Inc., Comcast Corporation Class A and Salesforce.com, Inc.

Shares of Elevance Health, the health insurer and healthcare-services provider formerly known as Anthem, traded lower on concerns about reductions in Medicaid coverage and increased utilization of services. The company reported a decline in earnings for its most recent quarter and reduced its forward guidance. We believe that margins will eventually stabilize as higher premiums cycle through its customer base. We continue to view Elevance as a well-managed company positioned to benefit from long-term secular demand for its managed care services in the US.

Tobacco company Philip Morris reported better-than-expected earnings for its most recent quarter, but slightly soft sales weighed on the stock. The company attributed the sales weakness to supply issues in Indonesia and Turkey due to regulatory changes. However, its noncombustible products continue to lead growth. We remain constructive on this cash flow-generative business and are pleased with Philip Morris’s commitment to returning cash to shareholders through reliable dividends and stock repurchases.

Japan’s Shimano, which manufacturers bicycle parts, fishing components and rowing equipment, lowered its forward guidance during the quarter because of weakness in overseas markets and ongoing inventory adjustments. Our investment thesis remains intact, as we are confident that Shimano can work through accumulated inventories after the strong but unsustainable demand for its products during the Covid-19 era. In addition to high-quality products and dominant global market share, the company has a strong history of returning capital to investors.

Comcast is the largest multinational telecommunications and media conglomerate in the US, with brands including Xfinity cable, NBCUniversal (theme parks and TV stations with Peacock streaming service) and UK-based pay-TV company Sky. The company reported better-than-expected results for its most recent quarter, but shares traded lower due to ongoing declines in broadband subscribers. Our investment thesis remains intact, as we believe Comcast has the scale, density and cost advantages to outperform both fixed wireless and other fiber internet providers over the long term. Meanwhile, the other parts of the business have been performing well, and Comcast continues to generate strong cash flows and return capital to shareholders through both dividends and share buybacks.

Shares of enterprise software developer Salesforce traded down after the company provided lower-than-expected forward sales guidance during its most recent earnings release. This prompted concerns about the company’s transformation from a software-as-a-service (SaaS) business to an AI-powered enterprise business (its Agentforce platform) and an overall slowdown in revenue growth. We believe that Salesforce is well positioned to grow and scale Agentforce over time, and we continue to like its operational strength, market dominance and focus on balancing growth with improving profitability.

We appreciate your confidence and thank you for your support.
Sincerely,
First Eagle Investments

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