Q1 2025 Market Update

Q1 felt choppy. January started hopeful. February and March reminded everyone that markets can still punch. For the quarter ending March 31, the S&P 500 finished down a little over four percent. The Nasdaq fell about ten percent. Value beat growth by a wide margin. Small caps lagged. Energy and the more defensive spots like health care and staples held up best.

The Fed stayed put. No cut. No hike. They kept the policy rate unchanged at the March 19 meeting and stuck with a measured tone. That helped stabilize bonds into quarter end and took some pressure off risk assets.

Tariffs were back in the headlines. The new administration signaled and then began rolling out measures that hit trading partners. Canada saw fresh duties announced in early February. Markets priced in wider trade friction, which added to the equity chop and pushed investors toward defensives.

Rates eased a touch across the curve during the quarter. That gave core fixed income a bid and helped cushion diversified portfolios when equities slipped.

Oil drifted lower from January into March. Good for input costs. Mixed for energy names. We kept watching supply signals and the downstream effects on transportation and manufacturing.

What we did.

We stayed disciplined. We trimmed very little. We kept leaning into the companies we know and the themes we believe will compound for years. AI infrastructure stayed on our radar. Not just the headliners. The picks and shovels around data center buildouts. Cabling. Interconnects. Power. Cooling. We also kept our eye on utilities and independent power producers that can sign long dated offtake with hyperscalers when the price and terms make sense.

We monitored names we have discussed with you before. Credo continued to execute into the spring with expanding hyperscaler demand and faster revenue growth, which confirmed the direction we outlined last year. We did not chase prints. We let our sizing and cost basis do the work.

We stayed patient with financial infrastructure like Marex. Volatility helps their model. Calm can compress it. Our view is unchanged. We size it accordingly and let the thesis play out over a full cycle.

What we're watching into Q2.

Earnings breadth. I want to see more than the top ten carry the tape.

Tariff follow through. Headlines are one thing. Actual effective rates, exclusions, and retaliation are what move supply chains and margins.

The Fed's path. A steady hand is fine. A credible glide path would be better.

Power demand vs supply. If AI build continues at this pace, contracted electrons become a moat. We will stay selective.

Seeking Alpha

Bottom line for Q1.

It was a quarter to sit tight, not to swing wild. We protected the engine of the plan by owning quality, avoiding noise, and letting time work. When prices weaken for the right reasons, we buy. When prices weaken for the wrong reasons, we buy more. When prices run on hype, we wait.

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