| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| - | - | - |
Q1 2026 played out in two distinct phases that validated Westfield's core thesis while introducing new complexities. January and February delivered the anticipated cyclical broadening with the ISM breaking above 50, small caps outperforming mega-cap tech by over 10%, and equal-weight trouncing cap-weight by the widest margin in years. This confirmed genuine underlying economic improvement. However, Iran's closure of the Strait of Hormuz on February 28 triggered the largest energy supply shock in recorded history, creating a one-variable market where equities moved in lockstep with energy prices. Despite this disruption, the broadening thesis remains intact. AI narratives are maturing from disruption panic to selectivity, favoring rigorous fundamental analysis. Private credit is showing cracks with widening CDS spreads and mounting redemption requests. Technical sentiment reached washout levels consistent with durable recovery setups. Westfield enters Q2 constructive and patient, positioned for a quality-first approach that can perform across scenarios.
The cyclical broadening trade remains intact despite geopolitical disruption, with genuine underlying economic improvement creating opportunities for active management through selectivity and fundamental analysis.
Westfield enters Q2 constructive and patient, with conviction in a quality-first approach built to perform in either scenario. The underlying economic improvement is genuine, dispersion is real, and the setup for active management is compelling.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Apr 14 2026 | 2026 Q1 | - | broadening, cyclicals, dispersion, energy, Geopolitical, Iran, Sentiment, small caps | - | Q1 2026 confirmed Westfield's broadening thesis before Iran's Strait of Hormuz closure created a one-variable energy market. Underlying economic improvement remains genuine with ISM above 50 and small caps outperforming. AI narratives are maturing toward selectivity while private credit shows stress. Technical washout signals constructive setup for active management. |
| Jan 6 2026 | 2025 Q4 | AAPL, AMZN, GOOGL, META, MSFT, NVDA, TSLA | AI, Breadth, cyclicals, earnings, Fed, small caps, technology, Valuations | - | Market leadership is broadening from mega-caps to cyclicals and small caps as earnings fundamentals improve and Fed easing supports the cycle. AI transitions from speculation to ROI discipline. Elevated valuations limit multiple expansion, making earnings growth the primary return driver. Westfield remains constructive but selective, emphasizing quality opportunities beyond mega-cap growth. |
| Oct 16 2025 | 2025 Q3 | - | AI, earnings, Fed policy, healthcare, industrials, retail, small caps, technology | - | Fed easing drove new highs but narrow leadership and speculative excess create fragile foundations. AI spending doubled since ChatGPT though circular financing raises sustainability questions. Earnings are broadening beyond mega-caps while industrials recover from prolonged downturn. Health care offers compelling value at multi-decade low valuations. Stay invested but emphasize quality and prepare for eventual normalization from current speculative conditions. |
| Oct 15 2024 | 2024 Q3 | - | Artificial Intelligence, market breadth, Market Concentration, Mean reversion, valuation dispersion | - | |
| Jul 11 2024 | 2024 Q2 | - | Active Stock Selection, Earnings Broadening, Federal Reserve Easing, market dispersion, Speculative Momentum | - |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q1 |
AIAI narrative is maturing from disruption panic to selectivity. Earnings for quality software companies held up through Q1, and the market is shifting from treating all software the same to identifying real beneficiaries versus companies with limited terminal value. |
Software Disruption Selectivity Earnings Analysis |
Private CreditCracks are starting to show with CDS spreads widening, redemption requests stacking up, and lenders marking down software-related loans. PE vintages from 2021 with software exposure may see portfolio companies down 80-90%. Returns are likely to come down significantly. |
CDS Redemptions Software Writedowns Returns | |
| 2025 Q4 |
AIArtificial intelligence enthusiasm supported large-cap growth companies and drove technology-led earnings growth. Much of today's technology-led earnings growth is supported by long-term capital investment in AI, energy, and infrastructure reflecting demographic pressures and labor scarcity. AI-related investment has been a major contributor to recent growth but is expected to slow from exceptionally fast levels. |
Artificial Intelligence Technology Investment Growth Infrastructure |
ValuationsEquity valuations remain elevated with the S&P 500 trading near 23x forward earnings, well above its long-term average of roughly 15.6x. Elevated valuations do not imply an imminent market downturn but tend to constrain longer-term returns and may increase market sensitivity to earnings disappointments. Current valuation levels suggest returns will depend more on earnings durability than further multiple expansion. |
Valuations Earnings Multiple Risk Returns | |
EarningsStrong corporate earnings drove market gains, particularly within technology and communication services. Consensus expectations cluster around low-double-digit S&P 500 earnings growth. Much of today's technology-led earnings growth is supported by long-term capital investment rather than leverage, with elevated valuations reinforcing the importance of focusing on companies with durable earnings power. |
Corporate Earnings Growth Technology Investment Durability | |
DollarA weaker U.S. dollar, down 9.4% in 2025, provided a notable tailwind for foreign assets and helped international equities meaningfully outperform U.S. markets. The dollar decline boosted European equity returns from 20.6% in local currency terms to 35.4% in dollar terms. |
US Dollar Currency International Performance Foreign Assets | |
RatesThe Federal Reserve cut rates by 25 basis points in December, bringing the policy rate to 3.5%-3.75%. The Fed cut rates three times in 2025 and currently expects one more cut in 2026, while markets are pricing in roughly two additional cuts. Higher yields have improved income potential with the 10-year Treasury yield ending at 4.18%. |
Federal Reserve Interest Rates Monetary Policy Treasury Income | |
| 2025 Q3 |
AIAI and infrastructure spending drove stocks through a self-financed buildout by hyperscalers. The AI economy now feeds on itself with suppliers, investors, and customers often being the same firms. Hyperscaler CapEx has doubled since ChatGPT emerged, creating circular financing that raises questions about project completion risks. |
Data Centers Infrastructure Spending Semiconductors Cloud |
EarningsThe earnings recovery is broadening beyond mega-caps, with small- and mid-cap estimates inflecting higher after two years of underperformance. The gap between the Mag 7 and the rest of the market is narrowing as cyclical sectors show accelerating profit growth. Consensus calls for double-digit EPS gains across most market segments in 2025-26. |
Small Caps Growth Quality | |
Risk AppetiteRetail investors now represent 20-30% of market volume, with record buying and options activity amplifying market swings. High beta, low quality, and high short-interest rallies defined Q3, while quality and low-volatility styles underperformed. This speculative behavior adds short-term fuel but leaves markets more fragile when positioning unwinds. |
Volatility Momentum ETFs | |
Infrastructure SpendingFed easing, fiscal stimulus, and improving leading indicators are setting the stage for a cyclical recovery into 2026. Industrial activity is stabilizing after the longest contraction on record, with stabilizing orders, improving backlogs, and rising earnings revisions pointing to a gradual rebound in industrial names. |
Defense Spending Construction Industrial Machinery | |
Biopharma M&AHealth care earnings revisions are turning higher, marking the start of a sustained profit recovery. Valuations remain historically depressed relative to the S&P 500, creating room for re-rating. Long-term structural tailwinds from innovation and accelerating M&A backdrop provide durable support for growth in the biopharma subsector. |
Biotechnology Pharmaceuticals Specialty Pharma |
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