Global equity markets have been grappling with a wave of challenges in recent months, leaving investors navigating a landscape marked by uncertainty and contradiction. From the disruptive flare of Trump’s so-called “Liberation Day” tariffs – briefly lighting a match under global trade tensions before a swift retreat – to elevated concerns over inflation (will interest rates rise?) and the growing spectre of economic slowdown (or will they fall?), the macroeconomic backdrop remains fraught.

With signs that the administration in the US is prepared to step back from some of the more extreme versions of its tariff policy, markets have staged a recovery of sorts, though the foundations of this appear fragile. Volatility and value now coexist in uneasy tandem, and in this environment, it is easy to see why funds that have a strong emphasis on capital preservation – the likes of Caledonia (CLDN), Capital Gearing (CGT), Personal Assets (PNL), and RIT Capital Partners (RCP) – are attracting attention. However, while investors might be unnerved by the noise, some are inevitably looking for the opportunities – particularly outside the US. We thought we’d turn our attention this week to areas of the market that we think look interesting and could benefit if the outlook and confidence improve.

Global equity markets and the UK equity market, in particular, are awash with value at present. Digging deeper, Europe and the UK seem to have benefitted from the turmoil more than most, but they had previously been amongst the laggards, so there is an element of catchup and rebalancing here. However, most, if not all, global equity markets look cheap versus their longer-term averages, and even their valuations just a few short weeks ago. The investment companies that hold them have generally seen their already wide discounts expand further.

Speaking to fund managers, they are not short of ideas and, if anything, face a problem of abundance. The consensus seems to be that, despite the turmoil being born in the US, that market still appears more fully valued than most, held up by its tech stocks. In contrast, European, UK and Asian equity markets are viewed as better pools to fish in.

Trump’s tariffs risk inflating prices for everyone, and against a risk of higher inflation and associated higher interest rates, already cheap growth stocks have de-rated even further. Cyclically exposed stocks have derated on concerns that the risk of recession or significant slowdown has increased. At the same time, more defensive allocations that are sensitive to interest rates – think utilities, infrastructure, renewable energy infrastructure etc – that tend to have long term debt – have been weighed down by concerns that interest rates may go up and may face less demand if there is a significant slowdown. In many instances this is a fallacy, as these assets frequently benefit from strong inflation linkages and so are able to pass through and may even benefit from a higher inflation environment over the longer-term. However, the economic impacts of Trump’s tariffs are broad, and it is little surprise that most areas are affected.

Of course, if it turns out that investors’ expectations turn to falling rates to combat lower growth, the reverse could be true. The window of opportunity to buy interest rate sensitive trusts might be small.

Turning to investment ideas, the UK still looks very cheap, with growth stocks and small cap stocks particularly affected. Funds such as BlackRock Throgmorton (THRG) and Montanaro UK Smaller Companies (MTU), both of which have particularly strong focuses on growth in the UK small cap space, repeatedly report that the underlying companies in their portfolios continue to perform well at an operational level but this is not being appreciated by the market. Both appear to have significant latent value within their portfolios and, having previously traded at premiums during more buoyant times, we think these could rerate strongly if the economic outlook improves and interest rates start to move down again.

As its name suggests, Baillie Gifford UK Growth is another UK trust with a strong emphasis on growth. Its manager tells a similar story of strong operational performance that is not being appreciated by the market. If the outlook for growth stocks improves, this could benefit from a significant rerating.

We have been saying that the prevailing discounts within the renewable energy infrastructure sector look too wide, with very limited exceptions. We like funds such as Bluefield Solar Income (BSIF), Next Energy Solar, Downing Renewables and Infrastructure, Foresight Environmental Infrastructure and TRIG. We think that all of these have competent management teams and dependable income streams with strong inflation pass throughs. However, their discounts don’t seem to reflect this.

Aquila European Renewables (AERI), currently in managed wind down, also warrants a mention in our view. It recently sold an asset at NAV (click here to read more) and while there can be no guarantee that all sales will achieve NAV, recent transaction history shows that sales of renewable energy assets regularly achieve their carrying values and it is not uncommon for these to be priced at a small premium to NAV. Given this context, AERI’s c.35% discount looks significantly overdone, even allowing for some uncertainty around the costs of liquidating the rest of the portfolio and winding up the trust.

We also like Greencoat UK Wind (UKW), although this has struggled against a backdrop of lower-than-expected wind resource for a few years.

In the renewables space, the recent bidding war over Harmony Energy Income (HEIT) highlights that the hefty discounts of the battery storage funds do not make sense – c. 40% for Gresham House Energy Storage (GRID) and c38% for Gore Street Energy Storage at the time of writing – and it is a similar story in infrastructure.

BBGI Global Infrastructure (BBGI) is trading at a small premium at the time of writing following a bid from the Canadian pension fund British Columbia Investment Management (BCI). Pension funds take a long-term view and so it is easier for them to look through the current market noise. Good arguments can be made that some of the NAVs are currently depressed by elevated discount rates (and lower power prices in the renewable energy infrastructure space that have potential to revert) and the reality is that BCI likely still sees value in BBGI’s assets given that it is prepared to pay a modest premium to NAV to acquire them. We like funds such as Pantheon Infrastructure (PINT), GCP Infrastructure (GCP), HICL Infrastructure (HICL) and Cordiant Digital Infrastructure (CORD). We also like 3i Infrastructure (3IN) and think this has recovery potential but its discount is not as attractive as the others.

HydrogenOne Capital Growth (HGEN) and Seraphim Space (SSIT) hold earlier stage speculative investments that have a significant proportion of their value discounted back from some point in the future. In both cases, the opportunity set is huge, and we think both could rerate strongly if the outlook improves and interest rates recede.