Letters to investors

Background: Trump’s Announcements and Market Volatility Between 2017 and 2021, President Donald Trump’s public statements – from tweets to official policy announcements – became notorious for moving financial markets. Traders and analysts closely watched Trump’s Twitter feed and press remarks for clues, as even a single tweet could whipsaw stock prices or bond yields. Two key gauges of market fear and volatility often referenced in this period were: Trump’s term saw dramatic swings in both indices, frequently in reaction to his policy decisions on trade, Federal Reserve commentary, and later the COVID-19 crisis. This raised the question: Did Trump and his administration time their market-moving announcements strategically? Observers have speculated that provocative announcements often came during calm markets, whereas reassuring messages were deployed amid… Read more

The equity rally in Europe throughout 2024 and early 2025 has proven as short-lived as we expected—confirming the fragilities we consistently flagged (see our May 2024 newsletter: link). The latest downturn, deepening in recent days, is politically triggered rather than driven by endogenous economic weakness. This episode illustrates not only the cost of chasing momentum at the wrong time, but also the real pain of following the crowd: portfolios that paid performance fees are now left with sunk costs. European bond market volatility, meanwhile, represents tactical opportunity rather than systemic risk. On the systemic front, our internal models detect no structural distress for now. Finally, we are reactivating our deep value framework—recently upgraded with the latest academic insights—to reposition equity exposure with a strategic… Read more

Despite persistent policy uncertainty under the new US administration, the foundational drivers of US economic preeminence remain intact. Structural advantages—such as labor market flexibility, institutional resilience, and innovation capacity—continue to support growth. However, rising tariffs and political volatility have slightly reduced GDP forecasts and temporarily lifted inflation expectations. Equity investors should closely monitor momentum indicators, with selected re-entry points likely to emerge in the coming months. US Equities: Strategic Reassessment and Re-entry Framework While we maintain our constructive stance on US equities—underpinned by GDP growth in the 1–3% range, historically associated with positive equity returns—we are currently adopting a more tactical approach. We remain selective both picking names and entry levels. Recent underperformance aligns with patterns seen in past temporary dislocations, not structural shifts…. Read more

Private credit – loans made by non-bank lenders to mostly mid-sized, non-public companies – has been offering yields near 9% (often even in the low double-digits) in recent years. This substantially exceeds yields in traditional public credit markets (e.g., corporate bonds or broadly syndicated loans). Several factors help explain why private credit carries this yield premium. Below we analyze the key aspects: risk premium, liquidity and market structure, regulatory arbitrage, investor psychology, and sustainability of the private credit boom. 1. Risk Premium: Higher Yields for Higher Risk Private credit’s elevated yields primarily reflect ahigher credit risk premium. The companies borrowing in private credit markets are generally smaller, more leveraged, and less transparent than typical issuers in public bond or loan markets. In essence, private… Read more

Copper Prices Continue to Gain Momentum Copper remains in an upward trend, with London Metal Exchange (LME) prices rising to $9,331 per ton. The rally is supported by strengthening industrial demand, supply constraints, and growing investor interest. U.S. industrial activity has returned to expansion, further reinforcing base metals’ bullish outlook. China’s Post-Holiday Demand Recovery in Focus Copper prices are also benefiting from expectations of a post-Lunar New Year demand revival in China. Investors are closely monitoring manufacturing activity as it resumes, with signs pointing toward inventory replenishment in the coming weeks. The Yangshan premium has stabilized at $68 per ton, indicating that Chinese copper demand has normalized after a problematic 2024. U.S. Manufacturing Activity Rebounds Supporting this sentiment, recent data shows that U.S. manufacturing… Read more

The outlook for U.S. Treasuries in 2025 is compelling, driven by easing labour market pressures, continued disinflationary trends, and elevated term premiums. While recent volatility in yields reflects fiscal and monetary policy uncertainty, economic fundamentals suggest declining yields in the year ahead. Easing labour market pressures Labour market conditions have eased significantly, with supply and demand moving toward equilibrium. Indicators like the quits rate and job openings per unemployed worker show a shift from the tight labour conditions of 2021–2022 to a more balanced state. With the hiring rate at its lowest level since 2013, labour demand is slowing, reducing wage-push inflation and weakening worker bargaining power. Cyclical sector weakness Cyclical sectors such as retail, manufacturing, and construction are showing clear signs of strain…. Read more

Some time ago, I wrote about Russia’s expansion of naval and commercial shipping routes in the Arctic, positioning itself as a dominant player in the increasingly accessible Northern Sea Route. You can revisit that piece here: “An Arctic Conundrum: Russia, Climate Change, and a Global Power Struggle” May 2023. Fast forward to today, we are faced with a seemingly eccentric statement from Donald Trump, coupled with a new communicative approach that could mark a decisive step forward for the markets. His suggestion that the U.S. should “take care” of Greenland, either with or without Denmark’s involvement, might sound impulsive. However, a closer look reveals a much deeper geopolitical rationale, aligning with what should be the West’s long-term strategic goals in the Arctic. The Arctic… Read more

The year 2024 presented financial challenges, characterized by geopolitical instability and looming recessionary signals, yet also revealed significant opportunities driven by technological growth and evolving macroeconomic conditions. Simplify Partners maintained stability with a balanced and risk-conscious strategy. As we enter 2025, we identify seven key themes that hold potential across global markets, including European growth initiatives, geopolitical risk mitigations, and the impact of fiscal and productivity dynamics in the U.S. Our outlook remains cautiously optimistic, focusing on sustainable growth areas and active portfolio management to navigate uncertainties and capitalize on emerging trends. The Economic Landscape of 2024 Despite recurring signals of economic downturn from U.S. recessionary indicators, 2024 saw growth in equities and gold, fueled by substantial fiscal stimuli and advances in technological sectors…. Read more

Recent developments in the price of gold have raised questions about its divergence from the traditional economic fundamentals that have historically influenced it. While real interest rates, the U.S. dollar, and physical demand for gold have typically driven prices, these factors no longer justify the sustained rally in gold. Instead, a macroeconomic hypothesis suggests that the fiscal deficit’s massive creation of fiat money, especially U.S. dollars, has increased the value of alternative physical assets, including gold. This theory offers a more plausible explanation than central bank purchases by nations like Russia and China. In this newsletter, we explore these themes and the broader implications for investors. Gold’s Divergence from Traditional Fundamentals Historically, the price of gold has been closely linked to a few key… Read more

The S&P 500’s recent journey toward all-time highs, despite underlying economic risks, reflects an equity market driven by optimism in monetary policy shifts. However, with historically high valuations, especially within tech-heavy indices like the Nasdaq, a cautious outlook is advised. Market trends show that while current euphoria may persist, sustainability is questionable as economic realities and past easing cycles indicate mixed market performance. This newsletter explores the current state of market euphoria, high valuations, and the implications of a possible Federal Reserve easing cycle on equity performance. Equity Market Euphoria: A Delicate Balance In the last several months, the S&P 500 has passed its historical peaks numerous times, displaying a resilience that may appear surprising given the economic backdrop. The equity markets seem to… Read more