Darius McDermott, fund manager on the VT Chelsea Managed fund range and managing director of Chelsea Financial Services looks at what bumblebees and the stock markets have in common that enable them to fly against the odds.
Bees should not be able to fly. And yet, they do. That’s the bee mystery which I’m sure many of you have heard about before. Back in the 1930s a French entomologist called Anotine Magnan was convinced that their flight was “aerodynamically impossible”. However, he made the mistake of treating bees’ wings as if they were fixed (like a plane) – this logic means they should not be able to fly because their wings are just too small.
The reality is a bee’s wings are not rigid, they’re flexible, with the tip of the wings twisting and rotating, which creates little vortices that allow them to fly by cutting through the air. Recent history shows financial markets are just as flexible, with the ability to cut through uncertainty and move forward. Already rife in markets, geopolitical pressure has only worsened since the return of Donald Trump as US president. Liberation Day shocked markets given the size of the tariffs presented on the now famous bingo board in early April 2025. But we must remember volatility is not a dirty word – it can also bring big opportunities.
Take Brexit as an example: those invested in the FTSE 100 in the 12 months following Brexit made a 25% return on their investment*. Those invested in global equities in the 12 months following the peak of Covid made a 50% return**. The old saying “time in the market not timing the market” never rang more true, with markets up almost 30% since early April this year***.
What we have now is an interesting formula in markets. Equities are at record highs and the unattractive spreads on corporate and high yield bonds (above government bonds) would suggest there is very little wrong with the world. However, a record high gold price and the fact that rates are going up on long-bonds would suggest the market is not convinced by this optimistic narrative. Those uncertainties might be around whether the likes of the UK and US governments are able to balance their books. But markets have a good track record of seeing through the uncertainty and they remain extremely resilient.
There are pocket of opportunities – but balance is the key
I am always as honest as I can be on outlooks – but 2026 feels almost impossible to predict given all the uncertainty swirling around markets. Balance is going to be very important, but there are pockets of value. I recently discussed the continued opportunities in both gold and silver, despite both being at record highs recently. Gold retains its value as a safe haven asset with geopolitical instability, central bank purchases, a falling US dollar and growing fiscal uncertainty resulting in the yellow metal reaching $4,300 per ounce****. However, the 67% return in physical gold has been dwarfed by 125% return from silver which****, despite its volatile nature, has a number of key tailwinds behind it, notably supply and industrial deficits (65% of demand comes from industrial requirements alone and is rising rapidly)^. We have been adding to silver miners in this area, where we see value given there are still attractive discounts.
Despite a few individual stocks bucking the trend, the past three years have been a challenging period for healthcare, with the sector underperforming the wider market. This reached a unique point in the second quarter of this year when the healthcare sector in the US produced the worst relative return versus the S&P 500 of any previous quarter in history^^. We’ve only seen falls like these on two previous occasions in the past three decades, notably in early 2003, following the bursting of the tech bubble, and in 2015-16, which was driven by political concerns and pricing pressures. Both periods were quickly followed by a strong bull run for healthcare stocks. We’ve added to the Polar Capital Healthcare Trust which invests across four sub-sectors: pharmaceuticals, biotechnology, medical technology and healthcare services.
Having held a quality growth stance across our global equities exposure for a number of years we have moved to a more neutral position. We’ve added to the ISFL Pinnacle Life Cycle Global Equity Select and ISFL Pinnacle Global Equity Income funds – both of which are core offerings with no style risks (they will happily invest in high growth and also recovery stocks). Ranmore Global Equity also offers something different – although it is a value fund, it has been resilient across most markets, making it an ideal diversifier.
UK small-caps continue to remain a challenging space, something which has not exactly been helped by the Autumn Budget! However, we continue to retain a strong position across our funds given they offer compelling long-term value at a time when most markets are fully valued. Like many of our peers we also see value in emerging markets, which have come out of the doldrums in 2025 given the weakness of the US dollar.
The final area to discuss is specialist investment trusts. This has been a mixed bag in 2025, but there continue to be compelling opportunities and attractive discounts. On the one hand our renewables have been challenging, but we’ve also seen strong M&A activity – the likes of Care REIT and Assura have both been acquired, which have benefitted us. We think some real estate investment trusts (REITs) are interesting. They’ve had a torrid period ever since interest rates started rising aggressively in 2022. However, rates are now starting to come down, yet many REITs remain severely depressed and trade on wide discounts and big dividend yields.
The worst thing to do in these conditions is hide
If 2025 has shown us one thing, it is that you should be careful about not being invested. Stock markets have fallen in the past and will continue to do so in the future, but they have also shown remarkable resiliency and flexibility to recover quickly. Contrast this with the fact that if you held £100 in cash between 2014 to 2024 you lost over a quarter of your purchasing power due to inflation^^^. I think I’d rather back the resilient bumblebee to continue flying from here!
*Source: FE Analytics, total returns in pounds sterling, 24 June 2016 to 23 June 2017
**Source: FE Analytics, total returns in pounds sterling, 16 March 2020 to 16 March 2021
***Source: FE Analytics, total returns in pounds sterling, 8 April 2025 to 18 December 2025
****Source: Trading Economics, 18 December 2025
^Source: Jupiter, 21 November 2025
^^Source: Polar Capital, 19 August 2025
^^^Source: ONS
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Darius’s views are his own and do not constitute financial advice.
