In our January quarterly letter, we cited the valuation gap between large technology stocks and the rest of the market. The glamour growth stocks have corrected more in the 1st quarter, but all stocks have declined with the Trump Administration announcement of Tariff initiatives.
Wall Street strategists have begun to reduce their market and earnings expectations and even increased the odds for a recession this year. The dramatic negativity is related entirely to the uncertainty of the extent of the implementation of tariffs. To us, the plans are well meaning, but an example of Too much, Too soon. We are hopeful that announcement of successful deals, country by country, will calm markets and illustrate that much of the rhetoric was merely “the Art of the Deal.”
In the meantime, this environment is an exciting time to be looking at individual stock opportunities given the values that have been created by the market downturn. We have learned through our career that events, including fundamental developments, occur more quickly than in the past and we believe strongly in the process of “time compression of events.” The 9.5% market gain last Wednesday was a useful example.
