Note Précis April 13,2025: Pandora’s Box, Volatility and Rough Road To Value

Note Précis April 13,2025: Pandora’s Box, Volatility and  Rough Road To Value – In a Pandora’s Box, overall capital market volatility beckons on a rough road to value. Policy and revenue angst is building with momentum market behavior now being over tariff jousts. It underscores rising systemic risk. As political, economic and corporate realities translate into hard data, we expect valuation metrics to play greater roles.

Despite exhortation by the IMF, OECD and the BIS, salient fiscal budget challenges remain obscured in the public discourse in most G20 countries. We favor shorter duration and up to 10 year maturity in Fixed Income. In Asset Mix we also favor gold bullion amid increased currency volatility and central banks adding to physical reserves,.

With results and 2025 expectations deluges imminent, corporations appear globally to be in a pincer of revenues moderating while costs rise and, interest cost uncertainty appears. Systemically, tariffs are paid through global growth and not by the proverbial “Man on the Moon”. Our expectations are reduced to at best 5% earnings growth for 2025 for the S&P500. Adding to volatility, equity valuations are not low low and momentum exists. We would favor quality of delivery and conservative balance sheet structure.

Amid capricious tariff risk, in information technology and related areas, we see software as better insulated than media. Defense and infrastructure potential spending patterns favor industrials. Worldwide now, consumers endure higher costs. Purveyors of basics appear better positioned than aspirational areas, even in erstwhile defensive drinks/cordials businesses. On strategic imperatives, materials and energy should override erstwhile cyclical designations. Banking and liquidity strength are even more crucial during volatile capital markets.  

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