Dear Investors,
We, at RetirePath Advisors, wanted to touch base as ‘Liberation Day’ arrives on April 2, 2025. It’s been mentioned lately, but for us, it’s not a major shift – just a date to note as we manage our strategy. With markets always moving, I thought I’d share some context on it and our approach.
Liberation Day’ has historically marked autonomy gains, like the end of colonial rule in places like India or Korea. Here, it’s a U.S.-specific term, currently stated by the President, tied to reciprocal tariffs to balance trade, effective April 2, 2025. Some view it as a push to make global trade 'fairer', others as a policy tweak and negotiating tactic. For our stocks and bonds, it doesn’t directly alter our outlook. We focus on long-term trends in equities and fixed income, not single events.
Markets might see some chatter or brief fluctuations – stocks reacting to attention, bonds shifting slightly. That’s typical. We’re staying focused on fundamentals, not short-term noise, and will keep monitoring conditions as usual.
To clarify our approach, here are a few key points:
Consistency Over Reaction: We prioritize a steady hand, avoiding quick shifts based on temporary market swings or event-driven hype.
Broad Market View: We track the wider trends in stocks and bonds, not just isolated moments, to help guide our allocation decisions.
Balanced Monitoring: We stay attentive to both equity opportunities and bond stability, adjusting only when the data supports it.
Noise Reduction: We filter out short-term distractions to keep our focus on the long-term objectives we’ve set together.
Updated outlook:
- We are cautiously optimistic on the next few months of stock market returns.
- We are less optimistic on long-term fundamentals such as GDP growth.
- Additionally, consumer and business confidence has moved lower with high uncertainty in D.C., but corporate earnings remain robust (Source: FactSet), and the consumer is on a solid footing (Source: Federal Reserve Economic Data).
- Investor sentiment is very bearish (Source: AAII), which could be a contrarian ‘buy’ signal, and we are entering a very good seasonal pattern at current as April and May tend to be strong for stocks (Source: Yardeni Research)
- 1 of our 5 drivers of stock market returns ended the month with a positive reading (Short-Term Sentiment), 3 out of the 5 (Interest Rates, Long-term fundamentals and Policy) ended the month neutral and the other 1 (Valuation) was negative.
- Major changes were a positive move in Short-term Sentiment (from neutral) as bearish sentiment and good seasonality both point to good chances of returns improving off a low. Long-term fundamentals moved into neutral territory from positive based on the above factors listed in point number one.
Recent updates to the portfolios included:
- Within Equities, the outlook for US stocks has been hampered by weakening confidence, tariffs and the promise of less government spending/more cuts, including jobs.
- This is less so overseas, as fiscal spending may increase, and inflation is subdued (Source: PIMCO).
- Additionally, overseas stocks have attractive valuations, solid recent momentum and could further benefit from their currencies strengthening versus the US dollar.
- We fund this trade with a decrease in Large Cap US stocks. This adds to international diversification, while still having a very large majority in our home country, US stocks.
- This is less so overseas, as fiscal spending may increase, and inflation is subdued (Source: PIMCO).
- A new small-cap fund has been added to and will be utilized for its more consistent process and higher capture ratios (Source: Morningstar Direct).
- No trades were done within broad fixed income, as our core bonds are providing a ballast against the current ‘growth scare’ (Source: Morningstar Direct).
- We remain slightly less duration than the Aggregate Bond Index.
- Additional trades were done in our Conservative Income models, where we reduced duration slightly and added more to ultra-short bonds from short maturity treasuries.
- Additionally, we made an update within our individual stocks to rebalance momentum names (adding JPM and NFLX, exiting ADBE and COP), while also rebalancing into more high-quality names like BRK.B and JNJ, while reducing our weight to Mag 7 stocks like AAPL and MSFT and low-quality stocks (UNP, DE).
If you have questions about your investments, we're here.
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