Q1 2025 – The Quarter That Was

The last three months provided three years’ worth of news, and judging by early April, it looks like this pace will continue. Tariff policy and the impacts on the global economy and financial markets have been shifting rapidly, sometimes on a weekly or even daily basis. Given the current speed of information, this note could be stale before you even have a chance to hear it. We apologize for that in advance.

We realize that a less predictable world can feel stressful. Despite everything happening around us, please be assured that we are managing your wealth with the highest levels of diligence and care.

In our last quarterly letter, we asked: “Will the priority be on pro-growth policies, or will brakes be put on the economy? The choice seems obvious, but ‘America-first’ rhetoric helped return the President-elect to office”. Looking back, we seem to have our answer.

For a while, it seemed promising. The “Trump trade” gathered momentum early, boosted by corporate buybacks, deregulation, and the prospect of interest rate cuts. By mid-February, major U.S. equity indices had climbed to record highs.

Unfortunately, the narrative abruptly shifted, as concerns over the economic impact of tariffs and trade wars grew. The NASDAQ was hit the hardest, as mega-cap tech companies trading at elevated multiples fell out of favour. Tesla and the rest of the “Mag 7” appeared less magnificent, declining 16% in the quarter as a group.

Like an old pair of boots or a broken heart, once the U.S. equity markets started to unravel, they really unraveled. By quarter-end, the NASDAQ had finished the first quarter down -10.4%, while the S&P 500 and Dow Jones indices fell -4.5% and -1.3%, respectively.

However, the weakness was not universal. Bond markets were flat to slightly positive. European, Asian, and emerging markets shrugged off tariff concerns and posted strong first quarters. Even the S&P/TSX was up +0.77%, despite Canada being placed in economic and political crosshairs.

Given that U.S. equity markets had been the fastest car on the track for years, we found this global rotation to be both noteworthy and encouraging, reinforcing the benefits of our diversified approach.

The volatility only intensified in early April.

Almost US$10 trillion was wiped off the value of the world’s stock markets, as threats and retaliations around tariffs escalated. U.S. Treasury bonds—typically a safe haven during market volatility—also sold off. The dual concerns of higher borrowing costs and financial instability appeared to trigger a partial and temporary reversal of tariff policy.

Amid this uncertainty, we remained active.

We were most active in the bond market, continuing our two-year trend of gradually increasing exposure. The Bank of Canada is expected to continue cutting interest rates, which would be supportive of bond prices. Government and high-quality corporate bonds typically offer important diversification benefits during volatile periods.

We added to private debt investments, and we are currently conducting due diligence on several new opportunities. Private debt remains an attractive destination for capital, offering floating rates, interest rate floors, and yields in the 6-9% range.
If economic conditions soften, traditional banks will likely pull back from lending, creating further opportunities for private lenders.

We also allocated to public equities during the quarter. We will continue using market volatility as an opportunity to tactically add to our public equity exposure.

Smaller allocations were made to a new private equity manager and to one of our longstanding multi-family residential real estate managers. As it stands, our Balanced Mandate now has a 34% allocation to private asset classes. The benefits of this allocation—especially in periods of public market volatility—are becoming increasingly clear.

While the world remains unpredictable, we remain consistent.

Though the external environment may not be stable or predictable, we are always in control of how we respond. Newport’s approach to protecting and managing wealth remains consistent, no matter the political climate, the state of the economy, investor sentiment, or the direction of public markets.

To find out more about Newport’s unique investment approach and discuss how our strategies align with your goals for 2025 and beyond, get in touch.

Kyle Smith, MBA, CFA® is a Managing Director & Portfolio Manager and a member of Newport Private Wealth’s Investment Committee.