As we hit the midpoint of 2025, we hope you’re staying cool this summer. The U.S. markets have bounced back impressively from this spring’s tariff-related turbulence. After a 19% drop in the S&P 500 during March and April, the index has surged over 20% from its lows, reaching new all-time highs. With tariffs being scaled back or delayed, a wave of optimism is driving markets forward. This recovery underscores a key lesson: short-term worries often fade, rewarding those who stay focused on the long term.
During the market’s ups and downs, we capitalized on lower prices to invest in high-quality, resilient companies at attractive valuations. We trimmed oversized holdings to keep your portfolio balanced and added businesses poised for steady growth, from innovative large-cap leaders to promising smaller firms. Our approach remains grounded in quality, value, and long-term growth to ensure your investments thrive.
Diversification remains a cornerstone of our investment philosophy. One of the most surprising developments in 2025 has been the outperformance of international markets. The EAFE index has surpassed the S&P 500 returns by over 13% year to date. Markets in Europe and Japan have led the way in the first half of the year. While few predicted this, it underscores the value of maintaining broad exposure across asset classes, including those that may have lagged temporarily. Developed international markets have been undervalued compared to the U.S. for years, and this shift highlights the benefits of staying diversified.
We’re witnessing an economic transformation, driven by technology—particularly AI—that’s spreading far beyond tech giants. Just as the iPhone revolutionized personal productivity, AI and automation are transforming corporate efficiency across industries. Companies are investing heavily in AI, cloud computing, and capital expenditures, driving scalability, and cutting costs. This can boost profitability, positioning firms for sustained growth.
In the S&P 500, where technology now accounts for 32%, innovation is critical. For example, one of our core portfolio holdings, Cisco Systems, which we highlighted earlier this year, is capitalizing on AI-driven networking demand and is up 16% year-to-date with a reasonable P/E of 17x (compared to the Mag Seven’s 30x). We remain confident in Cisco’s strong positioning for continued growth. Beyond tech, another key holding, Walmart, is leveraging AI to optimize supply chain management, pricing, and logistics, much like healthcare has embraced innovations like GLP-1 drugs. These advancements in Cisco, Walmart, and other portfolio names are driving efficiency and profitability across sectors, creating exciting opportunities for your investments.
While market volatility may persist due to policy uncertainties, trade negotiations, or government debt concerns, we remain optimistic. The ongoing tech transformation is unlocking new efficiencies and growth potential, benefiting a wide range of industries. By staying diversified, focusing on quality, and seizing opportunities in undervalued assets, we’re positioning your portfolio to capture these gains over the long term.
We’re excited about the possibilities ahead and grateful for your trust in us. If you’d like to discuss your portfolio or have any questions, please reach out.
