| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | - |
US equity markets posted notable gains in 2025 with tech-heavy indices leading, as the Nasdaq gained over 21% and S&P 500 rose 17.9%. Early year volatility from stubborn inflation data and trade policy concerns gave way to stabilization as conditions improved. The Fed implemented three rate cuts as a recalibration rather than aggressive easing, helping relax financial conditions while maintaining restrictive stance. Corporate fundamentals remained strong with healthy margins, solid free cash flow, and robust capital spending, particularly in technology, infrastructure, and energy. Artificial intelligence drove significant investment though investors became more discerning about converting spending into earnings. Looking ahead to 2026, inflation remains the most significant factor with progress inconsistent and vulnerable to structural pressures. Labor market shows concerning divergence between income levels, creating K-shaped economic structure. Higher valuations require continued earnings growth, making selectivity crucial. Companies with strong pricing power and efficient operations are better positioned, while geopolitical risks and policy changes could trigger volatility.
Markets finished 2025 on solid footing despite early volatility, supported by resilient economic activity, gradually improving inflation trends, and steady corporate earnings, but 2026 outlook faces key challenges from persistent inflation pressures, labor market divergence, and the need for continued earnings growth to justify higher valuations.
Several trends likely to influence 2026 markets with inflation being most significant factor. Progress has been inconsistent and vulnerable to new pressures. Labor market dynamics show divergence between income levels. Monetary policy timing and pace will hinge on inflation data. Earnings growth becomes more critical with higher valuations. Global risks including geopolitical issues and regional trends could create volatility.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 22 2026 | 2025 Q4 | - | AI, earnings, growth, inflation, rates, technology, Trade Policy, volatility | - | Inflation showed signs of moderation from highs but remained inconsistent month-to-month. Services and housing inflation proved more persistent than goods inflation. Structural issues like higher minimum wages, fiscal deficits, and supply chain constraints suggest inflation may settle at higher levels than markets expect. Artificial intelligence was a significant theme with substantial investments and rising valuations among large tech firms. Investor focus shifted toward companies that could convert AI investment into earnings, showing less patience for rising costs or uncertain returns. Trade policy concerns and renewed tariff discussions added uncertainty to global supply chains and pressured investor sentiment in specific sectors. Tariff-related pressures appeared more evident in employment decisions than headline inflation data as employers adjusted staffing rather than passing costs to consumers. |
| Oct 24 2025 | 2025 Q3 | - | earnings, policy, Resilience, Softlanding, volatility | - | The market commentary emphasizes economic and market resilience despite political dysfunction, tariff tensions, and data uncertainty. Strong earnings, broad sector participation, and the start of a Fed easing cycle are cited as supporting risk assets through volatility. Resilience is positioned as an investable theme as markets climb the wall of worry while adapting to late-cycle conditions. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2025 Q4 |
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 |
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 | |
Trade PolicyRecent tariff policies continued to negatively impact U.S. consumers and companies throughout the year. However, international companies have been finding new trade arrangements and growth opportunities, benefiting from shifts in global trade patterns as the new U.S. administration alters terms of international cooperation. |
Tariffs International Growth Cooperation Impact | |
| 2025 Q3 |
Resilience2025 tested the fund's thesis severely with a bankruptcy, major customer losses, and cyber-attacks, yet delivered 17.45% net returns. The manager emphasizes that edge comes from exploiting inefficiency rather than avoiding adversity, demonstrating portfolio resilience through active management. |
Adversity Active Management Drawdowns Volatility |
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