United States
US stock market outperformance has been driven entirely by the 0.0002 percent of US superstar companies. But this superstar outperformance is based on two highly questionable assumptions: that all productivity gains from the generative-AI revolution will go into corporate profits; and specifically, into the profits of the Web 2.0 superstars which will morph into the generative-AI superstars. As these assumptions become undermined in the coming quarters, relative performance will reverse, starkly. On a structural horizon, stay maximum overweight Europe versus the US. Plus: time to go underweight global financials (IXG).
Our Portfolio Allocation Summary for March 2025.
The US High Quality (USHQ) portfolio slightly underperformed in February, returning -0.7%, whilst its SPY benchmark returned -0.6%. While we continue to monitor the portfolio monthly, over a quarter-on-quarter basis, USHQ posted meaningful outperformance vs. benchmark, generating +130bps of excess return, while also exhibiting lower volatility and drawdown.
Trump will pull back from the trade war when stocks approach bear market territory. He will not withdraw from NATO. Favor European stocks on fiscal policy.