May Newsletter 2025
April 30, 2025
“Buckle Up for a Wild Ride”
Dear Client:
I hope this letter finds you well and optimistic. As we move through another dynamic year, I want to take a moment to acknowledge the journey we are sharing. I understand that staying informed on market shifts, policy changes, and global events can be challenging, but I appreciate the trust you have placed in us to navigate these times. As you focus on long-term wealth accumulation and building your retirement nest egg, we are here to provide clarity and guidance as we work toward your financial goals. Reflecting on recent market movements, I will share insights into how we see today’s environment in this letter and during future meetings.
Looking back over the past three client letters, we have addressed growing volatility across global markets driven by inflation concerns, shifting Federal Reserve policy, geopolitical tensions, concerns on the potential for a recession and ongoing tariff negotiations with key trading partners like China, Mexico, and Canada. Despite short-term headwinds and market pullbacks, Intelligent Investment Management’s aggregate portfolio has remained resilient, outperforming major indices through disciplined, long-term strategies that emphasize total return via growth and dependable income.
April was a wild ride, as we saw in last month’s letter featuring the symbolic roller-coaster. From April first to April eighth, markets fell like a rock - bears were on a rampage, and fear was hard to set aside. The total value of the accounts we manage declined by 7.4 percent at their lowest point during the month; Equity Portfolios were down as much as 10.6 percent, and the Income side of the portfolio fell 3.1 percent. This was a sudden, sharp reaction to policy decisions that news sources headlined throughout the month. Investors scrambled to recalibrate expectations in real time.
Our total aggregate portfolio did what it is known for - it steadily climbed back up. The Total Equity portfolio rebounded by nine percent (Domestic Portfolio up 9.7 percent, Alternative Equities Portfolio up 7.9 percent), and Income Portfolio rose 3.6 percent (CD/Bond Ladder was up 0.7 percent, Alternative Income was up twelve percent), from the April 8th low through the end of trading on April 30th.
These kinds of recoveries reinforce the value of a diversified portfolio, and the use of patience while depending on our long-term strategy built on solid investments. The total portfolio yield remains above 4.5 percent - a strong cushion in a volatile market environment. I have recently been showing clients the benefits of our diversified strategy using our newly designed quarterly reports, along with an alternative financial data package of reports that reinforces the income cash flow and the value of the CD/Bond Ladder strategy during times of uncertainty. This structure is designed to meet the needs of clients in distribution and helps insulate against fears tied to dramatic market swings and emotionally charged headlines, because the cash needs for distribution are already in the bank. For those still building their portfolios, these steady income streams of interest and dividends are used to invest in high quality investments when the market is low.
Clients need to understand that occasional discomfort and market volatility are part of the journey and that meaningful long-term benefits come to those who remain patient and avoid emotional decisions. Markets and investments operate in cycles with natural ups and downs. When emotions are set aside and investors stay focused on the long term, they are rewarded - not just with peace of mind, but with meaningful progress toward their goals. Historically we know that after a downward market trend, eventually comes the upside.
The chart below reflects five historic portfolio declines of ten percent or more and the recovery experienced in the following two years performance.
Today, the markets were down most of the day, following news that the U.S. economy unexpectedly contracted by 0.3 percent in the first quarter of 2025, before recovering sharply at the closing bell. The decline during the day was largely driven by a 41.3 percent surge in imports, as businesses rushed to stockpile goods ahead of the anticipated rising tariffs. This inventory buildup significantly dragged down Gross Domestic Product (GDP). This news stands in sharp contrast to the current Atlanta Fed’s forecast, which calls for an estimated 2.4 percent growth in the second quarter of 2025.
As market values respond to the headlines of the day, more data will soon follow. Tomorrow and Friday will bring the latest updates on jobs and payroll numbers to provide insights into hiring and expectations on the economy. Next week, the Fed will release the minutes from their latest meeting. All this information feeds into how portfolios are valued in today’s market. A more prominent viewpoint is to stay the course, as illustrated in Warren Buffett’s quote: “In the short run, the market is a voting machine, but in the long run, it is a weighing machine.” Translated that means short-term market movements are driven by sentiment, but over time, fundamentals determine value. Ultimately, it is the time in the market - not timing of the market, which matters.
Despite this volatility, the message for clients remains clear: this too shall pass. Market discomfort is nothing new. While policy noise will continue, strong portfolios, built on sound principles, have consistently shown the ability to weather storms. Ultimately innovation will outweigh negative policy impacts, which has some economists projecting potential growth; one economist I read about today referenced the US economy’s potential for four percent GDP growth by 2030. Stating, “because the U.S. private-sector innovation promises to offset bad policies and erratic policymaking”. Our job is not to react to every headline, but to act with discipline when opportunity presents itself, scooping up investments when they are considered at prices that will provide good long-term value. We remain focused on your long-term goals, managing risk, and positioning your portfolio for future growth.
Meanwhile, key voices in the financial world are urging caution. Jamie Dimon, in his recent shareholder letter, described the current moment as “one large additional straw on the camel’s back,” warning that the longer the trade conflict persists, the greater the risk of lasting economic damage. Liz Ann Sonders, Charles Schwab’s Chief Investment Strategist, also flagged the bond market as an area of potential concern and noted that policy uncertainty makes forecasting increasingly difficult. Many companies are pausing on making investment decisions, and there are signs of stress in consumer behavior. The investment team at Bridgewater Associates, one of the largest and most respected hedge funds in the world, described the current climate as a “once-in-a-generation” economic shift. While acknowledging risks tied to trade policy and geopolitical tensions. They also point out that major transitions often create meaningful opportunities for those who adapt with discipline.
As your investment advisors we continue to emphasize diversification and carefully chosen investments that generate long-term value through income and growth. Our message is consistent, stay focused on long-term goals and use proven strategies. Take advantage of market adjustments as they are temporary and remain aware of larger macroeconomic themes like rising national debt and shifting tariff policy. Nothing is certain but change and our strength lies in following markets closely and rebalancing when appropriate, always with an eye on opportunity.
We continue to believe in the long-term resilience of the U.S. economy. The clients I have met with over the past month share that belief and maintain a long-term outlook - generally defined as ten years or more until funds are needed or when retirement begins. If you do not have a long-term outlook, please let us know so we can review your goals and update your Investment Policy Statement accordingly.
Steve and I expect to be busy this summer meeting with clients to help ensure everyone stays on the right track. As part of our commitment to providing meaningful reporting, we have recently updated our quarterly portfolio reports to make them clearer and more effective in highlighting the key elements of your portfolio. We hope you find these changes helpful, early client feedback suggests they have been well received.
As always, we welcome the opportunity to connect, whether you would like to review your portfolio allocation, revisit your goals, or simply discuss the current environment; we are here for you.
Intelligent Investment Management, LLP
