Spring Forward, Fall Back

After an initial "spring forward" in equity markets to begin the quarter, a "fall back" quickly ensued. Uncertainty and change were the only constants in both policy and markets.

The economic policies of the current administration have been a little bit like the spring weather. If you do not like it, wait a few minutes. There is a similar lack of clarity on inflation and interest rates, corporate earnings, and private markets deal making and capital distributions. Given this uncertainty, FEG is not “springing” into action just yet, but is also not standing still and letting the seasons pass by.

Key areas of focus include:

• A broadening market: Search for pockets of opportunity outside of U.S. large cap stocks, including small caps and non-U.S. markets. Combine passive U.S. large cap exposure with differentiated strategies that focus on less efficient areas of the market.
• Rates > Credit. So, do not be a hero in fixed income: Credit spreads are tight, so concentrate on higher quality for now. This provides dry powder to re-deploy if and when better opportunities arise.
• Illiquidity premium (or at least liquidity): Continue private capital programs to seek a return premium versus public markets over the long-term. Some assembly required, but it can be done. FEG is closely monitoring strategies that buy and professionalize smaller founder-led and family-owned businesses. While distributions (liquidity) remain soft, FEG believes they will return eventually.

Despite extreme volatility and a lack of clarity on tariffs and other policies, select opportunities within the volatility exist. Prudence requires balancing a strategic approach to risk management and diversification with tactical opportunism. As spring inevitably turns to summer, it would be wise to carry an umbrella.

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Read the full Q1 2025 Portfolio Insights.