Q1 2025 Quarterly Market Commentary

Staying Disciplined Amid Shifting Markets

The first quarter of 2025 has highlighted the importance of discipline and diversification in navigating a rapidly evolving investment landscape. After a strong run in 2024, markets have experienced renewed volatility, shaped by shifting global trade policies, changing interest rate expectations, and ongoing geopolitical developments. Our approach remains rooted in long-term principles, with a focus on fundamentals and a commitment to helping clients stay the course through periods of uncertainty.

Market Overview

• Volatility and Diversification:

Recent market pullbacks are well within the range of normal corrections. Historically, a 10% sell-off in US equities has occurred in nearly half of all rolling 12-month periods over the past three decades. This quarter, diversification has again proven its worth: while popular US technology stocks have retreated, gains in defensive sectors such as healthcare and consumer staples, undervalued regions like China and the UK, and high-quality government bonds have provided important offsets.

• Trade Policy and Economic Fundamentals:

The return of more protectionist US trade policies has led to market swings, but the broader economic impact is nuanced. The effects of tariffs depend on their scope, currency movements, and how companies and consumers adapt. Broader drivers-such as fiscal and monetary policy, supply chain adjustments, and sector-specific cycles-continue to shape economic outcomes. It is essential to focus on these fundamentals rather than react to every headline.

• Interest Rates and Inflation:

Inflation remains above target in many regions, but expectations are for central banks in the UK and US to lower rates further this year. This environment supports high-quality bonds, which continue to provide both income and a cushion against equity volatility.

Investment Principles in Action

• Diversification:

Spreading investments across asset classes, sectors, and geographies remains the most effective way to manage risk and smooth returns, especially during uncertain times. Diversification helps offset weakness in one area with strength in another, as seen in the positive performance of Chinese and UK equities and government bonds during recent volatility.

• Long-Term Focus:

Market corrections are a normal and healthy part of the investment cycle. Maintaining a patient, long-term perspective helps avoid emotional decision-making and allows investors to benefit from opportunities that arise when others are fearful. Recent history shows that periods of uncertainty often create the best opportunities for disciplined investors.

• Valuation and Fundamentals:

A focus on valuation and underlying company fundamentals remains key. Markets may overreact to short-term news, but a disciplined approach anchored in research and fair value can help identify attractive opportunities, particularly in regions or sectors that have fallen out of favour but offer compelling long-term prospects.

Looking Ahead

As we move further into 2025, markets are expected to remain sensitive to policy changes and economic data. However, the lessons of history are clear: staying diversified, focusing on long-term goals, and maintaining discipline are the best ways to navigate uncertainty and capture opportunities as they arise. If you have any questions about your investments or would like to discuss your financial plan, please do not hesitate to contact us.

This commentary is for general informational purposes and should not be construed as investment advice. Past performance is not indicative of future results. All data as of 31 March 2025 unless otherwise stated.

Richard Waugh

CEO