Rally, high rates and portfolios under review. Is it time to adjust investments?

Closing of the year, high rates, stock markets at maximums and a mystery floating in the air. Is it time to move or is it better to stay still? Many small investors are asking just that question. And the interesting thing is that, at the same time, the large funds are already They have begun to answer it with very concrete decisions. Weight changes in portfolio. Rotations. Liquidity entering or leaving. And if you follow the trail of that money, a pretty clear roadmap is drawn.

It is not the first time that the institutions have come forward. They often set the pace. But the curious thing is that this time they do it in the middle of a slippery slope. Because yes, the Ibex has risen close to 40% in 2025. The Nasdaq and large technology companies are once again around historical records. And inflation, although moderate, continues to condition the decisions of central banks. With that board on the table, the big funds are not leaving, but they are not entering blindly either. They are repositioning themselves. And they are doing it quickly.

According to Morningstar data, in November, more than 60% of recent flows into equities have gone to funds that prioritize consistent profits and companies with cash. In this scenario, value funds are once again gaining ground. Especially in Europe.

This movement is not limited to looking for cheap companies, but also translates into a clear turn towards defensive sectors such as health, energy and infrastructure. A pattern visible in products such as Amundi European Equity Value, JPMorgan Europe Equity Plus or Schroder European Quality Income. Amundi, for example, has reinforced defensive exposure in its European range, increasing weight in health and utilities versus technology.

Europe returns to the radar

An interesting detail appears here. While many individual investors continue to look at the United States, institutional investors continue to bet on the Old Continent. And they do so because valuation multiples in Europe, especially in the south, remain below their historical averages. Spain included.

BlackRock, for example, has increased its stake in Enagás to almost 6%, consolidating itself as its main shareholder, and has also once again exceeded 5% of the capital in Redeia, strengthening positions in a particularly defensive sector.

At the same time, several Spanish managers are also rotating their portfolios. Santalucía AM has focused on conservative assets such as sovereign bonds, private credit and defensive alternative investments, looking to 2026, and Mutua Madrileña, through Mutuáculos and EDM, is intensifying its position in defensive European equities, reducing exposure to more volatile sectors.

Technology raises its foot and short bonds return to the scene

But there is more. Because it doesn’t just matter where they are entering. It also matters where they are coming from. Here the focus is on the sectors most sensitive to interest rates. Technology, consumer discretionary and some companies with demanding valuations have begun to lose strength in the portfolio.

According to internal data from JPMorgan AM, European funds have reduced their net exposure to technology by almost 12% since September. The reason? It is not that they lose faith in growth, but rather that they prefer to wait for better prices or greater visibility in results.

Another important twist is liquidity. Although many funds maintain exposure to equities, the weight of liquidity in the portfolio is quietly increasing. According to another Bank of America report, the average allocation to cash in the large global funds now exceeds 5%, its highest level since April.

And what about fixed income? Well, it is beginning to recover some of the lost ground. Especially in short sections and corporate issues with good ratings. Funds such as Pimco or AXA IM have intensified their commitment to two- and five-year bonds with attractive coupons, taking advantage of the pause in rate increases and the expectation of cuts in 2026. They are doing so with a surgical strategy, far from the “all or nothing” that marked some movements in 2022.

And this links to another detail. Many of these funds are not making big bets, but rather small adjustments. They change weights, rotate sectors, introduce coverage. In short, they prepare. In case there is a rally, but also in case there is a pothole. And in that sense, market photography is starting to look less like a tactical move and more like background management. Never better said.

The managers are revealing this in their quarter-end reports. Fidelity, for example, has spoken of a “gradual adjustment of risk exposure” and a “normalization of expectations” for the next twelve months. Others such as Schroders or UBS AM have issued similar messages. There is no euphoria. There is no fear either. What there is is strategic caution.