| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | - |
The fourth quarter of 2025 concluded with strong market performance across all major asset classes, but beneath the surface lies a K-shaped economy where higher-income households maintain resilient spending while lower-income consumers face mounting pressure from elevated credit costs and slowing wage growth. Inflation surprised to the downside at 2.7%, driven by cooling shelter costs, yet consumer sentiment remains near historic lows. Credit stress is emerging with record credit card limits of $5.3 trillion and rising delinquencies. The Federal Reserve has pivoted accommodative, cutting rates and restarting quantitative easing at $40 billion monthly. With President Trump's approval rating at 36% ahead of midterm elections, affordability has become a policy priority. Despite elevated valuations and midterm year headwinds, earnings expectations remain robust with mid-teens S&P 500 growth forecasted for 2026. The firm maintains a constructive outlook on diversified portfolios while identifying opportunities in quality large-caps, small-caps, and municipal bonds.
A K-shaped economy is emerging where higher-income households spend with confidence while lower-income households buckle under rising costs and slowing income growth, driving policy accommodation and creating differentiated investment opportunities.
The administration's increasing focus on the lower-income consumer is critical for understanding the economic, policy, and market backdrop heading into 2026. Policymakers appear to be responding to weak consumer sentiment as though the economy is entering a broader slowdown, with the Federal Reserve pivoting toward accommodation and deficit spending remaining elevated.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 16 2026 | 2025 Q4 | AAPL, AMZN, GOOGL, META, MSFT, NVDA, TSLA | consumer, credit, earnings, Federal Reserve, inflation, K-shaped, Midterms, rates | - | Headline CPI eased to 2.7% year-over-year in November, driven largely by slowing shelter costs. The shelter component slowed from 3.8% in September to 3.0% in… |
| Oct 13 2025 | 2025 Q3 | - | Artificial Intelligence, Bubbles, Federal Reserve, tech, Valuations | - | 103 Advisorys Bubblicious report examines parallels between the AI-driven rally and past bubbles, warning of speculative excess even as AI spending surges to $340 billion… |
| Jul 11 2025 | 2025 Q2 | - | Bond Yields, credit spreads, deficits, fiscal policy, tariffs | - | The letter analyzes the impact of aggressive tariff policy and the passage of the Big Beautiful Bill, emphasizing fiscal stimulus, tax cuts, and deficit expansion… |
| Mar 31 2025 | 2025 Q1 | - | - | - | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
Credit StressThe fund is responding to historically low credit spreads by reducing exposure to high yield and other lower-rated debt. They believe current spreads offer insufficient compensation for credit risk and increase the risk of permanent impairment of capital. The managers are downside-focused and do not share the market's optimism needed to justify such low spreads. |
Credit spreads High yield Credit risk Permanent impairment Risk compensation |
InflationInflation has continued to be a persistent feature in Japan and has prompted changes in both corporate and consumer behavior. Importantly, inflation has fed through to corporate earnings and equity performance. Companies that have successfully passed on higher costs to consumers have benefited from improved operating margins. |
Inflation Corporate Earnings Operating Margins Consumer Behavior Cost Pass-through | |
RatesFederal Reserve resumed rate-cutting cycle with first cut since December 2024, signaling resumption of easing. Expected three cuts of 25bps between now and first quarter 2026 as Fed responds to signs of weakness in US labor market. |
Fed Monetary Policy Labor Market Easing Liquidity | |
Trade DownDollar General delivered strong same-store sales and margin improvement as customers traded down from grocery and pharmacy channels. This trade-down behavior provided a tailwind to margins that are expected to persist into 2026. |
Discount Retail Consumer Margins Traffic | |
| 2025 Q3 |
AIAI has been integrated into RGA's research process through tools like NotebookLM, Gems in Gemini, and Claude Code. The firm views AI as a force multiplier for human judgment rather than a replacement, emphasizing the Kasparov Law principle. They believe the market narrative around AI displacement is swinging to unhelpful extremes, creating investment opportunities. |
Machine Learning Automation Software Productivity Innovation |
| 2025 Q2 |
FiscalPolicy |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| No Elevator Pitches found | ||||||||||
| TICKER | COMMENTARY |
|---|---|
| AAPL | Apple Inc. represents 1.6% of company owned with cost basis of $6,255 million and market value of $61,962 million, providing $280 million in 2025 dividends. |
| AMZN | One company we own that we think has unique positioning to benefit from both the infrastructure and application layers is Amazon. Amazon's logistical prowess is one of the foremost moats in business today and it can and will be enhanced with AI. The company will do this in multiple ways, with better orchestration of its logistics assets and underlying cargo, as well as the buildout of more capable, sophisticated and robust robotics. Amazon is singularly well positioned to dominate the coordination layer, with AI's help, across its entire logistics network. |
| GOOGL | In the third quarter, Google, Kairos Power, and the Tennessee Valley Authority announced a major collaboration centered on a novel power purchase agreement. Google followed this announcement with another significant step forward. On October 27, Google and NextEra Energy announced plans to restart the Duane Arnold Energy Center. |
| META | On January 9, Meta Platforms unveiled a new agreement with Vistra—the largest generator of competitive electricity in the United States—as well as with TerraPower and Oklo. The announcement builds on Meta's agreement last year with Constellation Energy and positions the company to become one of the largest corporate purchasers of nuclear-generated electricity in the United States. |
| MSFT | MSFT was a detractor in 4Q25 following its fiscal first-quarter 2026 earnings report released on October 29. While results were better than expected operationally, investor reaction was driven by guidance and capital expenditure intensity rather than headline performance. Revenue grew 17% year-over-year, exceeding consensus expectations, and Azure revenue increased 39% year-over-year, also ahead of estimates. However, management guided to a sequential deceleration in Azure growth in fiscal Q2, signaling some moderation after a period of exceptional demand. |
| NVDA | AI bellwether NVIDIA's very strong set of earnings in late November helped the AI theme re-assert its dominance when investors breathed a sigh of relief following the results. |
| TSLA | Under the previous system, companies that produced only electric vehicles—most notably Tesla—generated large quantities of credits that could then be sold to manufacturers falling short of their EV production targets, allowing them to avoid regulatory penalties. |
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