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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
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"Historic tariff-driven market selloff creates long-awaited value opportunities as S&P 500 loses $5.4 trillion. Manager deploying cash reserves accumulated during stretched valuations into quality businesses at reasonable prices."
Hourglass Capital's Drew discusses the historic market selloff following the Trump administration's aggressive tariff deployment, including blanket 10% duties on imports and 34% on Chinese goods. The S&P 500 lost $5.4 trillion in two days as investors adopted a sell-first approach to the trade policy uncertainty. The manager draws parallels to Reagan's first term, when restrictive trade policies led to initial 25% market decline followed by 195% gains. Key risks include stagflation as tariffs drive inflation while cooling the economy, with Goldman Sachs projecting core PCE inflation reaching 3.5% by 2025. The Fed faces difficult choices between supporting growth through rate cuts or fighting inflation. Despite portfolio underperformance in Q1 with 0.7% returns versus Russell 1000 Value's 2.1%, the manager views the correction as long overdue and is deploying cash reserves built during periods of stretched valuations. The expanding list of investment opportunities at reasonable prices positions the fund well, assuming trade tensions resolve and underlying economic strength continues.
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