As we write what feels like the 5th or 6th iteration of this quarter’s summary and update, we are keenly aware of the day-to-day changes which may render some of its content out of date by the time you receive it. As we exited the first quarter of 2025, we found the economy in largely solid shape with our portfolios mostly still up for the year. Considering the negativity and uncertainty in the quarter had brought most stock indices into negative territory, we were cautiously optimistic.
On April 2nd, President Trump announced his “Liberation Day” tariffs, and market pundits quicky redubbed it “Obliteration Day”. US Stock indices fell precipitously before rebounding sharply a week later on the news of a pause in tariff implementation, then began their descent again today. Where the markets will be when you read this is anyone’s guess. We don’t believe anyone (including us) can be consistently successful guessing short-term market direction – nor would we try.
Periods of volatility can test even the most seasoned investors, but history demonstrates that remaining invested during uncertain times is critical to achieving long-term success. Missing only the 10 best days in the market between 1995 and 2024 would have resulted in less than half the returns compared to staying fully invested. Bear market recoveries often deliver substantial gains early on and selling during downturns risks missing these pivotal moments.
With the significant downward shift in markets, the S&P 500 and many other indices have numerically entered correction territory. Volatility spiked and bond yields fell (at least initially) as investors sought safety. Fear of a tariff induced recession led to considerable losses in the stocks of consumer cyclical, energy, and other economically sensitive companies. Further tariff concerns and the potential inflationary pressures will likely complicate the Fed’s decision-making. Despite the obvious challenges, there are reasons for optimism. The U.S. economy remains stable overall, with a healthy labor market and modest retail sales growth providing support.
We believe these moments offer opportunities for disciplined investors who focus on fundamentals rather than short-term noise. Corrections are a normal function of healthy markets, serving to recalibrate excesses and create opportunities for disciplined investors. We believe that periods of uncertainty reinforce the importance of adhering to a disciplined investment approach. Our strategy remains rooted in fundamentals-based research and prudent decision-making.
So, as always, we are concentrating on business economics, management’s ability and alignment with shareholders and buying stocks at reasonable prices. Underlying that strategy is a belief that economic forces ultimately prevail. While politics and popular opinion are prone to oscillation, companies and their management teams can adapt to market forces, political forces and many other constraints to optimize for returns and sustainability. We don’t always love the “feel” of the roller coaster ride, but we are often heartened by the opportunities that it can provide.
We also recognize that times like these require vigilance and adaptability. By maintaining liquidity and focusing on high-quality investments, we aim to navigate short-term challenges while positioning portfolios for future growth.
We deeply value the trust you place in us as stewards of your financial future. Please don’t hesitate to reach out if you have questions or would like to discuss further – we’re here to provide clarity and guidance tailored to your unique needs. Together, we look forward to navigating the opportunities and challenges of 2025.