Q2 2025 – The Quarter That Was

I’m Kyle Smith, providing an overview of the quarter that was.

On April 2nd, any hopes of a second quarter reprieve from trade policy uncertainty and market volatility were dashed. “Liberation Day” in the U.S. quickly knocked 10% off the value of the S&P 500 Index (S&P 500).

By the time a “90-day pause” was announced on April 8th, the Index had experienced its 11th worst three-day sell-off since World War II and found itself 21% below mid-February highs. While the pause served as a temporary tourniquet, decoding tariff threats and predicting potential economic consequences remained a daily exercise.

Despite threats global commerce, mixed economic data, military conflicts in the Middle East and the U.S. losing the last of its major triple-A credit ratings, investors seemed to shrug off any concerns. In May, the S&P 500 posted its best month since November 2023 and by June 30th, U.S. equity markets had rallied to their February peaks.

Bonds held steady after an early April selloff. The geographic rotation in public equities also continued as markets in Asia, Europe and Canada posted strong second quarters. Both valuation gaps versus U.S. peers and global investors looking at new places for capital fueled this reversal. Newport’s approach to public equity investing involves a diversified approach so we continue to find this rotation to be healthy.

Our Investment Committee approved $150 million in allocations in the second quarter, with the split between private and public asset classes coming in at 60/40, respectively. This exceeds activity at the same time last year by $80 million. It’s not surprising as periods of increased volatility typically provide opportunities for portfolio re-positioning.

The average investor is limited to owning traditional bonds or dividend paying equities. In contrast, Newport’s diversified yield strategy also incorporates investments in private income producing asset classes. These investments typically reduce volatility while generating stable, high quality and predictable sources of income.

This remained a focus in the second quarter as we allocated assets to four private debt managers and a private mortgage manager. We have an extensive history with both asset classes, and longstanding relationships with these managers.

In the quarter we continued to allocate to Canadian, U.S. and International markets. We also allocated a portion of our public equity exposure towards an actively managed portfolio of exchange-traded funds. This strategy complements our roster of well-diversified specialty managers. It also enables our Investment Committee to quickly obtain core market exposure, especially in periods of elevated volatility.

In this environment, we maintain a deployable cash weighting. We are managing through less predictable times so we believe it is prudent to have cash on hand should the public markets experience another pullback.

Currency fluctuations can impact performance in either direction. While this has benefitted Newport in recent years, the weaker U.S.-dollar has had a slight impact on short term performance. To mitigate this risk, and to lock in currency gains, we maintain an active currency hedging program.

On the real estate front, our multi-family real estate managers believe that demand for rental properties remains strong. As economic conditions normalize and investors adjust, deal volume—an important driver for private equity to realize value—should improve. We believe that interest rates could move lower, which would help valuations for both asset classes.

Despite the recent rally, current risks need to be taken seriously. As experienced in February and April, sentiment reversals are swift. The 90-day pause from April is set to expire and tariff-related threats are beginning to ramp up.

We expect trade-related developments and their economic impacts—along with concerns over the U.S. government debt burden and rising geopolitical tensions—to dominate headlines into year end. We are confident that we are positioned to navigate and thrive in whatever conditions we may face.

As Newport approaches its 25th anniversary, we’re reflecting on the road ahead as much as the one behind. Thanks for reading — we hope you’re finding time to recharge this summer.

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.