The second quarter of 2025 witnessed a significant resurgence in global equity markets, with robust absolute returns observed across various funds. Notably, non-U.S. equities demonstrated a remarkable outperformance compared to their U.S. counterparts during this period. This positive momentum was largely propelled by the strong performance of sectors such as industrials, aerospace and defense, and a selection of banking institutions, while pharmaceutical and consumer staple industries experienced a relative lag. Despite the persistent market volatility and global uncertainties, there remains a optimistic outlook for international value stocks, especially those in the small and mid-cap segments, underpinned by their appealing valuations and enhancing fundamental strength. This market dynamic underscores considerable prospects for investors who prioritize disciplined and price-sensitive investment strategies.

Global Market Rebound and Key Investment Trends in Q2 2025

In the vibrant financial landscape of the second quarter of 2025, global equity markets experienced a notable rebound, largely driven by a suspension of tariffs that had previously caused significant disruption. This period saw a powerful recovery, with many markets closing the quarter with impressive double-digit gains. A distinct pattern emerged: while U.S. markets were buoyed by a concentrated group of large technology and growth-oriented firms, their international counterparts found strength in more value-focused equities. This environment fostered substantial absolute returns for the Tweedy Browne Funds, ranging from 5.09% to 12.02%, with the International Value Fund II notably surpassing its benchmark.

By mid-2025, all four Tweedy funds had achieved double-digit year-to-date returns, spanning 11.71% to 21.53%. A significant highlight was the outperformance of non-U.S. equities against U.S. markets, a rare occurrence in over a decade. The MSCI EAFE Index, reflecting international markets, surged by 19.45% year-to-date through June 30, eclipsing the S&P 500's 6.20% gain. The two Tweedy international funds demonstrated impressive gains of 16.40% and 21.53% respectively.

The strong performance in the second quarter was predominantly fueled by industries sensitive to global demand and security needs. Leading the charge were aerospace and defense companies, including BAE Systems, Rheinmetall, and Safran, all benefiting from geopolitical tensions and increased defense spending. Banks also contributed significantly, leveraging favorable interest rate spreads and robust loan portfolios, with notable performances from Wells Fargo, National Bank of Canada, and Hana Financial. Other key contributors were Rubis, a French energy distributor; LG Corp, a South Korean industrial giant; and CVS Group, a UK veterinary services provider, all recognized for strong cash flows and attractive valuations. Investments in small and mid-cap businesses, valued between $2 billion and $10 billion, consistently delivered the best returns, indicating their undervaluation by the broader market.

Conversely, Switzerland's healthcare sector, featuring giants like Roche and Novartis, experienced a downturn due to concerns over product pipelines and competitive pressures. The consumer staples sector, including companies like Nestlé and Diageo, also faced challenges from muted revenue growth and inflationary cost pressures. The energy sector, particularly TotalEnergies, saw declines linked to weakening oil prices. Additionally, companies such as Alten and Teleperformance were impacted by project delays and concerns over competition from artificial intelligence.

Currency fluctuations also played a pivotal role. Funds hedging their foreign currency exposure, like the International Value Fund, saw their relative performance tempered by a weaker U.S. dollar, whereas unhedged funds such as the International Value Fund II benefited from the dollar's depreciation, amplifying their returns when converted to U.S. dollars.

Looking forward, the global investment landscape remains intricate. Despite significant momentum in equity markets, particularly in tech and non-U.S. equities, volatility persists due to uncertainties surrounding tariffs, increasing government debt, ongoing conflicts, and their potential implications for inflation, interest rates, and corporate earnings. While caution is advised given elevated valuation multiples, the relative discounts available in non-U.S. equity markets, especially within small and medium-capitalization companies, present considerable opportunities for astute, price-conscious investors.

The investment committee, including Roger R. de Bree, Andrew Ewert, Frank H. Hawrylak, Jay Hill, Thomas H. Shrager, John D. Spears, and Robert Q. Wyckoff, Jr., confirmed their personal investments in one or more of the funds, underscoring their confidence in the strategies.

Reflecting on Global Market Dynamics: A Journalist's Perspective

The recent performance in global equity markets offers a compelling narrative for investors and market observers alike. The robust recovery, particularly in non-U.S. equities, suggests a broadening of investment opportunities beyond the dominant U.S. tech sector. It highlights the importance of diversification and the potential for value-oriented strategies in an ever-evolving economic climate. The strong contributions from industrials and defense sectors underline how geopolitical shifts can directly translate into market movements, reminding us that global events are not just headlines but significant drivers of financial performance. For individual investors, this serves as a powerful reminder: while headline-grabbing tech stocks often dominate discussions, the real value might lie in overlooked sectors and geographies. The emphasis on small and mid-cap international companies further reinforces the idea that diligent research can uncover substantial, undervalued assets. This period truly underscores the dynamic interplay of macroeconomic factors, geopolitical tensions, and astute investment selection in achieving superior portfolio returns.