2025 Q2 Client Letter: News, Fluctuations & Enduring Principles

To the Clients of Resilient Asset Management:

 

Greetings from World HQ in Memphis.  I trust everyone enjoyed a festive 4th of July Holiday and a respite from life's hustling.

 

A whole lot has transpired in the world in the past 90 days - Tariffs, Military Action in Iran, Continued Conflict in the Ukraine to name a few of the headliners.  Yet, despite these seemingly market damning events, the S&P 500 rose well over 10% in the second quarter.  I'm reasonably confident double digit return predictions for the coming 90 days were scarce on March 31, 2025.  Indeed, this is yet another example of the wisdom of simply staying invested and NOT attempting to predict market action, a truly fruitless (or worse) endeavor.

 

Of particular note this year (so far) has been the performance of International Equities.  As 2024 came to a close, some market commentators opined of "US Exceptionalism" that was then "permanent".  Another market related warning:  Never assume current market conditions will persist in perpetuity.  

 

While my United States is indeed a unique, exceptional place, there are several other capitalist-minded countries around our world with considerable investment merit.  Moreover, some countries' stock markets had (and continue to have) valuations far lower than the United States.  To that point, the first half of 2025 showed what International Diversification can bring to a portfolio....some of you may have seen this in your own portfolios we manage on your behalf.

 

This is by no means a victory lap - International Stocks still are way, way behind the US in trailing 10-Year Performance.  For those keeping score, the US Market Returns are about 173% higher over the past 10 years as I write this.  Does this mean recent performance is an anomaly, or mean reversion, or some other market-related force....I have no idea.  What I do know is that over the very long-term, US and Int'l Equities have had much more similar results than over the previous decade.  I also know that over time valuations matter.  So for those whose portfolios we manage, you can anticipate International exposure in your portfolios.

 

Where we go from here is anyone's guess.  While the pace of headlines has certainly increased in the present administration, the fundamental principles of what has made the capitalist system great remain quite sound.  True, there will always be a steady supply of issues to address, you can be certain of that.  And an even better bet is that the media will be playing up any controversy to the max.  No matter what the headline, the wise person adheres to principles through thick and thin while faddists come and go.

 

I will leave you with another anecdote about long-term investing - the recent sale of the Los Angeles Lakers.  You may have read that the recent sale price valued the Lakers at $10 Billion...a record sale for a professional sports franchise.  This sale came after the 1979 purchase price of $67 Million - an incredible 149X return.  The interesting part is that if Dr. Buss, whose surviving family members are the sellers, had simply invested in the S&P 500, he would have enjoyed an ending account value of - wait for it...$13 Billion.  Of course, this ignores taxes, which would have taken incremental pieces along the way.  And who could resist being the Lakers owner during the Showtime Era of the 80s followed by the Kobe Bryant Era in the 2000s.  The investing lesson here is just how powerful compounding is, whether it is in professional sports teams or in good 'ol index funds....start early and stay the course over as long a runway as possible.

 

As always, the door remains open to anyone needing to discuss their own unique situation.  Meanwhile, thank you all for your continued trust in Resilient Asset Management - we are honored to assist you in achieving your financial goals.