| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | - |
Markets delivered strong returns in Q4 2025 despite navigating a complex environment marked by a historic 43-day government shutdown that created data fog and contributed to volatility. The S&P 500 gained 2.7% in Q4, bringing full-year returns to nearly 18%, while the Fed cut rates by 0.50% but signaled a pause for early 2026. The AI investment theme matured as investors became more selective, shifting focus from headline growth to economics and profitability. Market leadership rotated toward large-cap value, with health care leading sectors while defensive areas lagged. International stocks continued outperforming US markets, gaining over 30% for the full year. Looking ahead to 2026, the bar is higher given expensive valuations, tight credit spreads, and elevated expectations. However, positives include continued tech innovation, record corporate profits, resilient consumer spending, and declining interest rates. The team maintains a disciplined approach focused on long-term objectives, diversification, and risk management to navigate whatever surprises 2026 may bring.
Markets delivered strong returns in 2025 despite navigating a complex environment including a 43-day government shutdown, Fed policy uncertainty, and evolving AI investment dynamics, but the higher starting point for 2026 requires disciplined focus on long-term goals and risk management.
The bar is now higher for 2026 given expensive stock valuations, tight credit spreads, and high expectations for earnings and economic growth. Despite the higher starting point, there are many positives including tech sector innovation, record corporate profits, and continued consumer spending. The team will continue to monitor economic data and market trends to ensure portfolios remain aligned with long-term objectives.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jan 9 2026 | 2025 Q4 | - | AI, Economic Data, Fed policy, Government Shutdown, Market Leadership | - | Artificial intelligence remained a key investment theme in Q4, but the narrative matured as investors became more selective. The market shifted focus from headline growth to AI economics, questioning capital requirements for data centers and whether companies could maintain spending pace without pressuring cash flow. Companies involved in large-scale AI projects faced increased scrutiny, especially where spending plans outpaced near-term cash flow. The Federal Reserve cut interest rates by -0.50% in Q4 but signaled a pause, emphasizing future cuts will depend on incoming data. Officials appeared divided between those warning policy remains too restrictive and others cautioning against cutting too soon and reigniting inflation. The shutdown data fog made Fed policy a source of near-term uncertainty and market volatility. |
| Jul 8 2025 | 2025 Q2 | - | - | - | |
| Apr 7 2025 | 2025 Q1 | - | - | - | |
| Jan 1 2025 | 2024 Q4 | - | - | - | |
| Oct 1 2024 | 2024 Q3 | - | - | - |
| 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 |
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 |
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