Downshifting: Why it Sometimes Pays to Ease Off the Accelerator

At TEAM, we often remind ourselves that “we shy away from making predictions or forecasts.” It’s not a slogan designed to sound cautious — it’s a discipline built into our process. Forecasts tend to be wrong more often than right, and worse, they create anchor bias: the human tendency to cling to an initial view even when the evidence changes.

Instead of speculating about where markets might go next, we focus on what markets are doing now. By grounding investment decisions in real-time evidence rather than conjecture, we avoid the trap of overconfidence and keep client portfolios aligned with the forces that are moving prices.

Following the Signals That Matter

Two guiding principles underpin our investment process. The first is to ride strong, established price trends — across equities, commodities, and other liquid assets — while those trends remain in force. The second is to maintain genuine diversification so that portfolios can withstand the inevitable turns in market mood.

In recent years, these principles have served us well. Consider the AI revolution that followed Microsoft’s multi-billion-dollar investment in OpenAI in 2023. The market narrative around generative AI ignited extraordinary gains for the leading global technology names. Importantly, those price moves were supported by equally strong profit and earnings growth — not just hype. Our process kept us closely aligned with that trend, ensuring clients benefited from exposure to the technology leaders that have shaped this cycle.

More recently, we’ve seen that trend broaden. Strong equity performance is no longer confined to the U.S.; leadership has rotated towards Asia, Europe, and even the UK. Because our framework continuously scans for changes in price behaviour across markets, it captured this “changing of the guard” early, allowing us to participate in that global breadth.

Gold, Silver and the Return of the Old Stores of Value

Another notable trend has been the resurgence in precious metals. Gold’s bull market was effectively set in motion by the G7’s decision in 2022 to freeze around $300 billion of Russia’s foreign assets — a watershed moment for central banks around the world. In response, many began diversifying their reserves, purchasing over 1,000 tonnes of gold annually for three consecutive years.

That steady central-bank accumulation has now been joined by strong institutional and retail demand, propelling prices higher. Silver, meanwhile, has benefited from its dual identity — a precious metal and an industrial input vital to solar, electronics, and electric vehicles. With global supply running persistently short, the market dynamic looks robust for years to come.

For TEAM, exposure to precious-metal mining stocks has long been a core component of our multi-asset strategies. Today, with gold and silver prices elevated and energy costs subdued, mining companies are enjoying expanding margins. Once again, our systematic process identified this trend early enough to add meaningful value for investors.

Diversification: The Unsung Hero

Our second guiding principle — diversification — may sound old-fashioned, but it remains as powerful as ever. A well-built portfolio should behave like an elite sports team: capable of playing offensively when conditions are favourable, and defensively when the environment turns against it.

For advisers, this concept is critical when explaining portfolio behaviour to clients. During “risk-off” phases, equity allocations may come under pressure, but defensive assets — such as high-quality bonds, cash, or selected alternatives — should help smooth returns. The objective isn’t to avoid volatility altogether; it’s to manage it intelligently so that clients can stay invested through market cycles.

In our multi-asset range, this philosophy ensures that when markets rise strongly, we participate, but when conditions deteriorate, there is ballast built in. That balance is especially important for lower-risk strategies such as Conservative and Balanced, where clients expect steadier long-term journeys.

Why We’ve Recently Downshifted

Against this backdrop, 2025 has been an exceptional year so far. Performance across the TEAM range has been strong, capped by an excellent third quarter where nearly every asset class contributed positively.

However, as stewards of capital, part of our role is to know when to ease off the accelerator. Several recent indicators have signaled rising complacency within markets — a red flag that encourages prudence:

• U.S. large-cap valuations are now “priced for perfection,” with the Shiller P/E ratio for the S&P 500 exceeding 40x — a level last seen during the dot-com bubble.
• Investor sentiment surveys reveal limited appetite for portfolio hedging, while retail participation has surged.
• Hedge-fund leverage has reached historical highs, magnifying potential downside risk.
• “AI mania” has led to opportunistic corporate deals and sharp gains in some unprofitable companies.
• Credit markets have started to show small but telling signs of strain.

None of these signals guarantee an imminent downturn, but together they point to stretched optimism. As such, we have moved to a maximum cash position within our Conservative and Balanced strategies — an unusual but deliberate decision.

Why Cash Still Counts

In periods when assets begin to behave uniformly — all rising together — correlations can quickly reverse if sentiment turns. Cash, in contrast, offers a risk-free anchor while we wait for more attractive entry points.

This doesn’t mean we’ve lost conviction in our long-term themes. Our allocation trims in gold, silver, mining equities, and technology reflect risk management, not rejection. When trends become parabolic, history teaches that a phase of consolidation usually follows. Downshifting now allows us to protect recent gains and maintain dry powder for when opportunities inevitably re-emerge.

Lessons for Advisers

For professional advisers, this episode underscores three enduring principles worth revisiting with clients:

1. Process over prediction. Forecasting may satisfy curiosity, but process drives outcomes. Disciplined frameworks help avoid emotional decision-making.
2. Diversification still works — if it’s real. True diversification isn’t about owning more funds; it’s about holding assets that behave differently when it matters most.
3. Behavioural awareness is a differentiator. Recognising herd behaviour, overconfidence, and recency bias — both in markets and in clients — helps preserve long-term discipline.

These lessons resonate particularly strongly in 2025’s market environment, where short-term narratives often overpower fundamentals. Advisers who can translate these insights into calm, evidence-based guidance for clients will stand apart.

Staying the Course

As ever, we are not in the business of guessing what happens next week or next quarter. Our focus remains squarely on monitoring what the data and price behaviour tell us — and adapting accordingly. This post-pandemic cycle has already thrown up extraordinary challenges and opportunities, and our systematic approach has allowed us to navigate both while delivering solid risk-adjusted returns.

Sometimes, thought leadership isn’t about predicting the next big thing; it’s about knowing when to slow down, take stock, and protect what’s been achieved. In our view, now is one of those moments.