As every month, you can read our investment report, in which we offer you a macroeconomic analysis of the market, a presentation of the performance of our funds and their results.

You can also watch our video update on the Digital Funds range.

July proved to be fairly calm by recent volatility standards (MSCI Europe NR +0.7%, MSCI USA NR +2.3%). While the traditional quarterly earnings season got off to a positive start, investors’ attention was focused on the outcome of tariff negotiations and the Fed meeting at the end of the month. The announcement of an agreement between the United States and the European Union was greeted with relief that sometimes bordered on complacency, especially as the US Fed’s tone proved to be rather hawkish despite the pressure exerted by the White House.

The stock selection process for our European equity strategies contains three inflection point smoothing mechanisms, designed to detect periods of overheated momentum, either in our funds or in the market. One of these mechanisms has just crossed a threshold, indicating that some of our holdings were excessively polarised towards overheating trends. This triggered an adjustment in the “Price Momentum” sub-portfolio of our European strategies, resulting in partial profit-taking in the defence and financial sectors in favour of more diversifying and defensive sectors. As the trigger materialised from 01/07/2025, the resulting transactions are part of the portfolio reviews described below. The impact of this mechanism is now fully reflected in the monthly reports at the end of July. If you would like more information, feel free to contact us.

Digital Stars Europe Acc posted a +2.4% return in July, outperforming the MSCI Europe NR by +1.7%. Since the start of the year, the fund has outperformed its index by +7.5%.

Small and mid caps, which are well represented in the fund, performed very well in July in relative terms. The fund’s sector allocation was still well-orientated, especially thanks to the overweight in finance. Banks particularly stood out, with BPER, Banco de Sabadell, BPM and Société Générale. In the financial services, Just Group rose by +65% on the announcement of the buyout offer from Brookfield. The fund also benefitted from the strong earnings publications of other stocks like Accelleron Industries, Exail Technologies or Friedrich Vorwerk. The portfolio reviews carried out in July included the smoothing mechanism. They were diversified, mainly increasing our positions in the consumer discretionary sector, as well as in IT and utilities. Among the exits were mainly companies from the defence and finance sectors. Digital Stars Europe is still significantly overweight finance, and underweight healthcare and consumer staples.
The UK remains the fund’s top country weight with 22.0%, ahead of Germany at 14.0% and Italy (largest overweight) at 12.3%. With an 10.0% weight, France remains the largest country underweight.

Digital Stars Continental Europe Acc ended July at +2.2%, vs. 0% for the MSCI Europe ex UK NR. Since the start of the year, the fund has outperformed its index by +12.8%.

The outperformance of small and mid caps continued to significantly support the fund in July. The fund’s good sector allocation contributed positively in relative terms, with the overweight in finance. The underperformance of defence stocks (reduced at the beginning of the month) was more than offset by the solid performance of banks like Société Générale, Swissquote, BPM or BPER. The fund also benefitted from strong earnings publications of companies like Exail Technologies, Friedrich Vorwerk or R&S Group. The portfolio reviews carried out in July included the smoothing mechanism. They were diversified, mainly increasing positions in consumer discretionary, as well as in IT and consumer staples. Among the exits were mainly stocks in the defence and finance sectors. Digital Stars Continental Europe is overweight in finance, as well as in real estate. The fund is underweight in healthcare and consumer staples. Germany represents the fund’s largest country weight at 17.2%, ahead of Italy (first overweight) at 14.1%, and France at 14.0% (which remains the largest country underweight).

Digital Stars Eurozone Acc posted a +1.9% return in July, beating the MSCI EMU NR by +0.9%. Since the start of the year, the fund has outperformed its index by +3.4%.

The fund’s good sector positioning, in particular its overweight in banks and underweight in semi-conductors, contributed to a good month of July. The fund was also supported by positive individual contributions, following the earnings publications at the end of the month. The portfolio reviews carried out in July included the smoothing mechanism. They were diversified, mainly increasing the positions in the IT, consumer discretionary and consumer staples sectors. Among the exits were mainly finance and industry stocks. The financial sector remains the fund’s main overweight, ahead of real estate and consumer discretionary. The fund is underweight in the industry, consumer staples and IT sectors. Italy remains the fund’s largest weighting at 23.5%, followed by Germany at 19.2% and France at 19.1%. Italy is the most overweight country and France the second most underweight.

Digital Stars Europe Smaller Companies Acc ended July at +2.9%, outperforming by +1.8% the MSCI Europe Small Cap NR (+1.1%). Year-to-date, the fund has outperformed its index by +8.3%.

The fund’s good performance in July was due to its good positioning, with an overweight position in financials and an underweight position in property. Good earnings announcements from stocks in a variety of sectors (Friedrich Vorwerk Group, Cicor Technologies, R&S Group Holding, Dometic Group, etc.) also made a positive contribution to the month’s performance. The portfolio reviews carried out in July included the smoothing mechanism. They were diversified, mainly increasing positions in consumer discretionary and IT stocks. Among the outflows were mainly stocks from the finance and industry sectors. The portfolio is now mainly overweight finance, IT and industry, and underweight real estate. Germany becomes the largest country weight at 19.0%, ahead of the United Kingdom (the most underweight country) at 16.5%, and Switzerland at 11.6%.

Digital Stars US Equities Acc USD ended July at 0%, vs. +2.3% for the MSCI USA NR and +2.0% for the MSCI USA Small Cap NR. Since the beginning of the year, the fund is -3.8% behind its index.

Against a backdrop of contrasted earnings announcements in July, the good performance of the fund’s industrial stocks, such as Comfort Systems USA, was not enough to offset the impact of the fund’s overweighting of the financial sector and underweighting of the technology sector. The rebalancing carried out in July was fairly diversified, with the inclusion of consumer discretionary, finance and healthcare, and the divestment of industry, real estate and media stocks. The fund is heavily overweight in financials and industrials. The most underweight sectors remain IT and media.

Dear investors,

The first half of the year saw a continuation of the stock market rally that began almost 3 years ago, against a very active political and geopolitical backdrop. The period was very favourable for the ‘momentum’ style, reflecting the strong trends seen in the market. At the end of June, the MSCI Europe NR posted a +8.5% return in EUR since the start of the year, and the MSCI USA NR +6.1% in USD.

Against this backdrop, all European Digital Stars strategies outperformed over the year, benefiting from sustainable trends in several market segments that had been identified in advance, particularly in the defence and finance sectors.

 

Annualised performance of Digital Stars funds

Risk indicator: 5/7

 

 

 

 

 

 

 

 

 

 

Source: FactSet/Chahine. Data as of 30/06/2025. Past performance is not indicative of future returns.

Digital Stars Europe (retail share class)

Source: FactSet/Chahine. Data as of 30/06/2025. Past performance is not indicative of future returns.

Over the first half of 2025, the fund’s “pro-cyclical” positioning has been favourable for Digital Stars Europe, particularly since the beginning of March when the small- and mid-caps began their rebound relative to the market. The wide dispersion within European equities has supported good stock selection, with a clear focus on the market’s strongest trends. The fund benefited from excellent sector positioning, with an overweight in financials and industrials, two of the market’s leading sectors in terms of weight and performance, and a clear underweight in healthcare and consumer staples. In the end, the fund benefited from the value theme and the renewed interest in defence.

 

Digital Stars Continental Europe (retail share class)

Source: FactSet/Chahine. Data as of 30/06/2025. Past performance is not indicative of future returns.

In the first half of 2025, Digital Stars Continental Europe benefited from its “pro-cyclical” all-cap positioning, as well as from a good selection of stocks, supported by a positioning well oriented towards strong underlying market trends. The fund’s overweighting of financials and industrials, and underweighting of healthcare, consumer discretionary (particularly luxury goods) and technology, contributed positively to the fund’s outperformance, echoing a favourable year for value and defence.

 

Digital Stars Eurozone (retail share class)

Source: FactSet/Chahine. Data as of 30/06/2025. Past performance is not indicative of future returns.

Digital Stars Eurozone benefited from a market environment that favoured its “pro-cyclical” all-cap positioning over the half-year. It also benefited from good stock selection and neutral sector positioning. The main contributors were financials and industrials. In terms of the fund’s positioning, the overweight in the financials sector, the main positive contributor to performance, was offset by an overweight in the consumer discretionary sector, particularly luxury goods.

 

Digital Stars Europe Smaller Companies (retail share class)

Source: FactSet/Chahine. Data as of 30/06/2025. Past performance is not indicative of future returns.

During the first half of the year, Digital Stars Europe Smaller Companies benefited from a good selection of stocks, supported by a positioning that was well aligned with the strongest underlying market trends. Good earnings announcements for the stocks in the portfolio, as well as an overweight in the financial sector and defence stocks, made a positive contribution to outperformance.

 

Digital Stars US Equities (retail share class)

Source: FactSet/Chahine. Data as of 30/06/2025. Past performance is not indicative of future returns.

In the first half of 2025, the US equity markets experienced a sharp correction, followed by a rapid rebound on the back of political developments, particularly on the issue of tariffs. This environment has benefited the largest caps, and the index is leading Digital Stars US Equities in terms of year-to-date performance, because of the fund’s all-cap allocation. However, the fund stands clearly ahead of the small cap index, showing the good stock selection of the strategy, particularly in the technology, industrials and consumer discretionary sectors.

FOCUS ON DIGITAL STARS EUROPE

Over the first half of 2025, Digital Stars Europe’s “pro-cyclical” all-cap positioning has been buoyant, particularly since the beginning of March. After a difficult start to the year in relative terms for small and mid caps, which have been well represented in the portfolio, these recovered from March onwards, benefiting the fund’s truly all-caps positioning. The new situation in transatlantic relations has certainly contributed to this turnaround, pushing the theme of sovereignty in different ways. In terms of economic sovereignty, since European small and mid caps are less dependent on trade with the United States, the context has been more favourable for them than for the larger, more globalised companies. As for military sovereignty, this was reflected in the market’s renewed appetite for defence-related companies, which are also well represented in the fund, particularly in the industrial sector (Kongsberg Gruppen, Rheinmetall, MilDef, etc.). The value theme continued to build on its momentum of 2024, while remaining well represented in the fund over the half-year, particularly in the banking (BPER, Banco de Sabadell) and insurance (Unipol Assicurazzioni) sectors. M&A rumours and manoeuvres in the Italian financial sector provided additional support for the sector. In addition to its overweight positions in financials and industrials (two of the market’s leading sectors in terms of weight and performance), the fund also benefited from excellent sector positioning through its marked underweight in healthcare and consumer staples.

 

Digital Stars Europe performance attribution vs. MSCI Europe, by GICS sectors

Gross performance and contribution, excluding fees. Data as of 31/12/2024 to 30/06/2025. Past performance is not indicative of future returns.

 

Portfolio dynamics

 

Positioning of Digital Stars Europe vs. MSCI Europe as of 30/06/2025.

These breakdowns evolutions are not constant and may change over time.

 

The portfolio’s style profile remained relatively stable over the first half of the year. In relative terms, the quality/visibility style generally behaves in the opposite way to the value style. Consequently, being underweight “quality/visibility” allowed the fund to be positively sensitive to the value trend that dominated the market in the first six months. The theme of the revaluation of value assets continued over the half-year, and should continue for certain segments that are still priced at a discount.

In terms of sectors, this stylistic positioning continues to translate into a clear overweighting of the financials and industrials sectors, and an underweighting of healthcare (especially pharmaceuticals) and consumer staples. This sector allocation remained stable over the period.

In geographical respects, Italy still represents the fund’s largest overweight, although this has been reduced in recent portfolio reviews. France remains the most underweight country.

Finally, our economic momentum indicator continues to show that the Eurozone economy is in a positive dynamic. This pro-cyclical regime is a priori more favourable to small caps in relative terms. The fund has therefore continued to apply an equal-weight logic for new entrants during portfolio reviews. As a result, the fund has an appropriate allocation that boosts exposure to small and mid caps and underweights the largest market caps. Our indicator could switch to contracyclical mode in the second half of the year. This would have the effect of reducing the underweight in the giant caps, as remaining too underweight in this market segment would represent a major active risk in this type of macroeconomic context.

Strong stylistic, sectoral and geographical trends benefited the Momentum factor as implemented in the European Digital Stars strategies, which significantly outperformed over the year. We will now attempt to analyse the forces that we believe will determine the performance of the European and US equity markets in the second half of the year.

 

 

Fundamental normalization led equity markets in the first half of the year

The stock market rally that began almost 3 years ago continued during the first half of the year (MSCI Europe NR +8.5% in Euro, MSCI USA NR +6.1% in USD), despite the particularly dense political and geopolitical news.

However, not all segments of the equity market benefited from this rise, and performance was atypically widely dispersed.

In Europe, for example, the banking sector gained +29.1% in the first half, while the consumer goods and healthcare sectors both lost -6.3%.

Source: FactSet/Chahine Capital. Data as of 30/06/2025.

 

Geographically, the US Dollar decline (-13.3% vs. Euro) was such that, expressed in Euro, US equities declined by -5.9% strongly underperforming Europe and China in the first half of the year.

Source: FactSet/Chahine Capital. Data as of 30/06/2025.

 

A perfectly intelligible and logical phenomenon in what could be the third and final stage of the stock market rally initiated in autumn 2022.

The first stage, between September 2022 and October 2023, was seen as easing up on the economic cycle. The global economy was proving far more resilient than anticipated, despite inflation at the time running into two digits.

The second stage, between October 2023 and December 2024, was the positive consequence of rapidly falling inflation and the imminence of an accommodating monetary pivot by central banks, which materialized in June 2024 for the ECB and September 2024 for the Fed.

The third phase, which has taken root since the beginning of the year, is that of the fundamental normalization of the various equity market segments. This phenomenon is traditionally observed at the end of an expansionary cycle.

 

Fundamental normalization boosted Value

This fundamental normalization explains the good performance of the Value segment and of small and mid-cap compartment in Europe during the first half of the year.

At the start of the year, all Value sectors, i.e. those with low valuations, were at a discount to their historical valuation standards. This is no longer the case. Conversely, the « expensive » sectors, notably the Visibility sectors (Food, Consumer Goods, Health Care, Media), exhibited a valuation premium at the start of the year, which their recent significant underperformance has gradually helped to normalize.

Source: FactSet/Chahine Capital. Data as of 30/06/2025.

 

The behaviour of the various geographies also contributes to this phenomenon of fundamental normalization. Europe’s strong outperformance is gradually reducing the historical discount observed at the start of the year. At the same time, the opposite phenomenon was observed in India and the United States during the half-year.

Source: FactSet/Chahine Capital. Data as of 30/06/2025.

 

Rising euro and trade tariff soap opera lift Europe’s domestic segments

This fundamental normalization in the first half of the year also lifted Europe’s most domestic market segments. This will surprise no one in a political context dominated by the new Trump administration’s threats of tariffs. All the more so as the euro rose sharply against the dollar, weighing on exporting companies in relative terms.

Banks, Insurance, Telecoms and Utilities stood out, as these sectors combine Value and domestic characteristics, unlike Consumer Goods, Healthcare or Automobiles.

This phenomenon also supported small and mid-cap stocks in relative terms. The latter generate only 13% of their sales in the United States, compared with 25% for large caps on average.

 

A more diversified Momentum in the second half?

The normalization process has been such that the fundamental discrepancies have now largely been rectified.

It would therefore not be surprising to see a gradual shift in the Momentum, which is currently highly polarized, towards segments that have been neglected.

Indeed, some segments have underperformed to such an extent that they are once again becoming attractive. In Europe, Food & Beverage, Healthcare, Consumer Goods, Luxury Goods and Automotive are all part of this trend. In the United States, a stabilization, or even a retracement, of the US dollar could boost small and mid-cap stocks in relative terms, which were neglected in the first half of the year.

The catalyst for this could be a larger-than-expected rate cut by the US Fed in the second half of the year, which would enable the Trump Administration to loosen its grip on tariffs and restore the confidence of investors scalded by the isolationist tendencies of the first half of the year.

As every month, you can read our investment report, in which we offer you a macroeconomic analysis of the market, a presentation of the performance of our funds and their results.

 

You can also watch our video update on the Digital Funds range.

 

The stock market rally that began almost 3 years ago continued during the first half of the year (MSCI Europe NR +8.5% in EUR), despite the particularly turbulent political and geopolitical situation. Strong trends have emerged during the half-year, which has been particularly favourable to the « Momentum » style, which topped the European styles league table with a +15.3% year-to-date performance (excluding dividends).

Two major themes guided the markets during the semester: a fundamental normalization and domesticity. The fundamental normalization is a fairly traditional phenomenon in the final phase of a stock market rally, which consists in bringing the various market segments closer to their standard valuation levels. This explains why the Value style performed well over the half-year. At the start of the year, all Value sectors, i.e. those with low valuations, were trading at a discount to their historical valuation standards. This is no longer the case. Conversely, at the start of the year, the « expensive » sectors, particularly the “Visibility” sectors (food & beverage, consumer goods, healthcare), carried a valuation premium, which their recent significant underperformance has gradually helped to normalize.

As for the interest in domestic stocks, this will come as no surprise in a political context dominated by the new Trump administration’s threats on tariffs. All the more so with the euro rising sharply against the dollar, weighing on exporting companies in relative terms.

The second half of the year could be somewhat different, however. The Fed could well surprise investors by resuming its rate cuts, allowing the Trump administration to loosen its grip on tariffs.

Digital Stars Europe Acc posted a +0.2% return in June, outperforming the MSCI Europe NR by +1.5%. Since the start of the year, the fund has outperformed its index by +5.5%.

Small and mid caps, which are well represented in the fund, performed very well in June in relative terms. The fund’s sector allocation was positively aligned with the market, particularly with an overweight in industry and underweight in healthcare and consumer staples. A number of stocks stood out, like Clariane in healthcare, Morgan Sindall in construction or Kongsberg Gruppen in defence. However, the defence sector suffered a number of setbacks with stocks like MilDef or RENK Group. The portfolio reviews carried out in June were diversified, mainly increasing our positions in the finance sector, as well as in materials and industry. Among the exits were mainly companies from the healthcare and real estate sectors. Digital Stars Europe is still significantly overweight finance and industry, and underweight healthcare and consumer staples. The UK remains the fund’s top country weight with 20.9%, ahead of Germany at 16.2% and Italy (largest overweight) at 13.1%. With an 8.8% weight, France remains the largest country underweight.

Digital Stars Continental Europe Acc ended June at +0.7%, vs. -1.1% for the MSCI Europe ex UK NR. Since the start of the year, the fund has outperformed its index by +10.1%.

The outperformance of small and mid caps continued to significantly support the fund in June. The fund’s good sector allocation contributed positively in relative terms, with an overweight in industry, and an underweight in consumer discretionary, consumer staples and healthcare. Some companies stood out, like Clariane in healthcare, VusionGroup in technology or Siemens Energy, or some others related to the defence theme like Exail Technologies or Kongsberg Gruppen. However, the defence sector also offered some of the lowest contributors like MilDef or RENK Group. The portfolio reviews carried out in June were diversified, mainly increasing positions in IT stocks. Among the exits were mainly stocks in the healthcare and communication services sectors. Digital Stars Continental Europe is overweight in finance and industry. The fund is underweight in consumer staples, healthcare, as well as in consumer discretionary. Germany represents the fund’s largest country weight at 19.0%, ahead of Italy (first overweight) at 14.8%, and France at 12.4% (which remains the largest country underweight).

Digital Stars Eurozone Acc posted a -0.1% return in June, beating the MSCI EMU NR by +0.7%. Since the start of the year, the fund has outperformed its index by +2.3%.

In June, the fund benefited from its “all-cap” profile, from its underweight position in the luxury goods sector (LVMH ends the month -7% down), and from good individual performances. The portfolio reviews carried out in June were diversified, mainly increasing the positions in the communication services, utilities and industry sectors. Among the exits were mainly finance and consumer discretionary stocks. The financial sector remains the fund’s main overweight, ahead of real estate. The fund is underweight in the industry, consumer staples and IT sectors. Italy remains the fund’s largest weighting at 22.6%, followed by Germany at 20.5% and France at 19.6%. Italy is the most overweight country and France the second most underweight.

Digital Stars Europe Smaller Companies Acc ended June at +1.8%, outperforming by +0.9% the MSCI Europe Small Cap NR (+0.9%). Year-to-date, the fund has outperformed its index by +6.1%.

The fund’s good performance in June came from stocks spanning a variety of sectors, including industry (Exail Technologies), IT (Cicor Technologies), chemicals (Alzchem Group), healthcare (Clariane) or automotive (AUTO1 Group). Among the worst contributors, the defence sector is well represented. The rebalancing carried out in June were diversified, mainly increasing positions in finance and IT stocks. Among the outflows were mainly stocks from the consumer discretionary and industry sectors. The portfolio is now mainly overweight finance and industry, and underweight real estate. Germany becomes the largest country weight at 19.8%, ahead of the United Kingdom (the most underweight country) at 14.0%, and Switzerland at 9.6%.

The stock selection process for our European equity strategies contains three inflection point smoothing mechanisms, designed to detect periods of overheated momentum, either in our funds or in the market. One of these mechanisms has just crossed a threshold, indicating that some of our holdings are excessively polarised towards overheating trends. This triggered an adjustment in the “Price Momentum” sub-portfolio of our European strategies, resulting in partial profit-taking in the defence and financial sectors in favour of more diversifying and defensive sectors. As the trigger materialised from 01/07/2025, its impact is not yet reflected in the monthly reports at the end of June. If you would like more information, feel free to contact us.

In the US, it was the more cyclical components of the US market that stood out over the half-year, despite the fall in the US Economic Momentum indicator, and the anxiety-inducing tariffs soap opera. The underperformance of small- and mid-cap stocks in the US may also come as a surprise, as these companies have a more domestic profile, but can be explained by the powerful fall in the dollar, which favours large exporters.
The Fed resuming its rate cuts would allow the Trump administration to loosen its grip on tariffs, and could be a catalyst capable of initiating a fundamental normalization process that should support the most discounted segments of the US stock market. Starting with small and mid caps. The MSCI USA Small index shows a -3.5% discount to historical levels (12-month forward P/E of 18.4x vs. 20-year average of 19x), while the S&P 500 index shows a premium of almost 30% (P/E +22.2x vs. average 16.8x).

Digital Stars US Equities Acc USD ended June up +5.5%, vs. +5.1% for the MSCI USA NR and +4.8% for the MSCI USA Small Cap NR. Since the beginning of the year, the fund is -1.4% behind its index.

The fund ended June ahead of the index, despite the good performance of IT, a sector supported by the GAFAM and NVIDIA but under-represented in the fund. This outperformance is due to the overweighting of consumer staples and construction, to the underweighting of biotechnology and utilities, and to a good stock selection (TTM Technologies, Sterling Infrastructure, Dave). The rebalancing carried out in June was fairly diversified, with the inclusion of industry and materials stocks, and the divestment of healthcare and consumer staples stocks. The fund is heavily overweight in financials and industrials. The most underweight sectors remain IT and media.