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18 Gibraltar International www.gibraltarinternational.comYet tariffs are just one topic vying for attention. The flash feud between President Trump and Elon Musk is showing no signs of moderating. The %u201cOne Big Beautiful Bill%u201d has brought deficits into focus and sent bond yields higher. The Iran-Israeli war and the US bombing of Iran%u2019s nuclear sites has increased geopolitical tensions and sent the oil price soaring.The stock market rally across May and June brought stocks to new all-time highs. Remember, all-time highs are bullish%u2026except for the last one in a bull cycle. But few investors anticipate a smooth ride higher from here.That said, our caution is not the type that leads us to panic sell. Rather, it is based on the logic that stocks don%u2019t go up forever and eventually pull back to some degree. Stocks have to pull back before going on to make further gains. That should lead us nicely into the strongest quarter of the year - October to December. Investors abhor uncertainty, but they have shown they can live with it.Recommended investmentHistorically, UK smaller companies have substantially outperformed larger stocks by between 3% and 4% per year. Formerly known as Invesco Perpetual UK Smaller Companies IT plc, Artemis UK Future Leaders plc (AFL) is an investment trust listed on the London Stock Exchange. It seeks to invest in UK smaller companies which the managers believe can establish market-leading positions in the future.UK Stock MarketMarket leaders tend to have better pricing power than the number two, three and four, which gives them the ability to cover inflation, thereby protecting the underlying profit of the business. New managers Mark Niznik and William Tamworth have a proven track record of investing in UK smaller companies and, importantly, both have backed the trust with their own money. They are excited by the opportunities they are seeing in the undervalued UK stock market, especially at the inefficient micro-cap end of the spectrum, and have the ability to use the trust%u2019s gearing to turbo-charge returns. When confidence in the UK begins to recover this should drive a strong re-rating of small cap share prices and narrow the 14% discount to NAV, delivering a powerful double-whammy.Strong valuation disciplineIn terms of their stockpicking process, Niznik and Tamworth use a disciplined approach to analysing the value of companies and the strength of their cash flows and profitability. A key tenet of their approach is a strong valuation discipline, which helps them avoid over-hyped companies and deliver better long-term returns. The portfolio is trading on a 11 times P/E multiple and the average company has zero debt.%u201cWe are seeing lots of takeovers at the moment, and lots of opportunities to reinvest in similarly attractive undervalued companies which have the traits we are looking for%u201d, says Tamworth, while Niznik observes an %u201cunprecedented%u201d level of small-cap share buybacks underway, which is a result of attractive valuations, strong balance sheets and management team%u2019s confident outlooks.The fund has an enhanced dividend policy, paying quarterly dividends distributing 100% of portfolio income enhanced by contributions from capital reserves. The dividend for the year is calculated to give a yield of 4% per annum based on the year end share price.Top 5 holdingsThe portfolio is well diversified with 60 holdings, and the ten largest holdings accounting for 25% of assets. The largest sector allocations are Consumer Discretionary (33%), Industrials (28%), and Technology (14%). Top 5 holdings include Alpha Group, Serco, Mears, Mony and Chemring.The Fund Managers have a good performance record, ranking top-quartile in their sector over one, three and five years. The TER is a reasonable 0.95% with no performance fee. Furthermore, the trust is trading at a 14% discount to NAV. Given the fund%u2019s enhanced dividend, which currently offers a prospective yield of 4%, we see no reason why AFL%u2019s shares should not trade on a premium once again.Please be aware that the value of your investments may fall as well as rise and your capital is at risk. Income from the investment may fluctuate in value in money terms. The Stock MarketContinued from p16www.gam.gi