The last three months provided three years’ worth of news and if early April is any indicator, this trend will continue. Tariff policy and the impacts on the global economy and financial markets change on a weekly, if not daily, basis. Given the current pace of information, this note could be stale before you have a chance to read it. We apologize for that in advance.

We realize that a less predictable world is stressful. Despite everything happening around us, please be assured that we are managing your wealth with the highest levels of diligence and care.

In our last quarterly letter, we asked: “Will the priority be on pro-growth policies or will brakes be put on the economy? The choice seems obvious, but “America-first” rhetoric helped return the President-elect to office”. Looking back, we seemed to have our answer.

For a while it seemed promising. The “Trump trade” gathered steam early thanks to corporate buyback, deregulation and potential interest rate cut tailwinds. By mid-February, major U.S. equity indices had climbed to record highs.

Unfortunately, the narrative abruptly shifted, as concerns over the economic impact of tariffs and trade wars grew. The NASDAQ was hit the hardest as mega-cap tech companies trading at elevated multiples fell out of favour. Tesla and the rest of the “Mag 7” appeared less magnificent and declined 16% in the quarter as a group.

Like an old pair of boots or a broken heart, once the U.S. equity markets started to unravel, they really unraveled. By quarter end, the NASDAQ finished the first quarter -10.4%, while the S&P 500 and Dow Jones indices sold off -4.5% and -1.3%, respectively.

However, the weakness was not universal. Bond markets were flat to slightly positive. European, Asian and emerging markets shrugged off tariff concerns and posted strong first quarters. Even the S&P TSX was +0.77%, despite Canada being placed in economic and political crosshairs. Given that U.S. equity markets had been the fastest car on the track for years, we found this global rotation to be both noteworthy and encouraging reenforcing the benefits of our diversified approach.

Early April provided further proof that a global trade war would have negative implications as nearly US$10 trillion was knocked off the value of the world’s stock markets. As threats and retaliations ramped up, U.S. Treasury bonds, often seen as a secure home for capital during periods of volatility, also sold off. The dual threat of higher borrowing costs and potential financial instability appear to have provided the impetus for a partial and temporary reversal of tariff policy.

Regardless of the recent rollback, a tone of unpredictability has been set, and it is against this backdrop that Newport’s Investment Committee must protect against current risks while uncovering and sourcing new opportunities. In the first quarter, cash reserves grew from 6% to 8% while $90 million was allocated to five public and private asset classes.

We were most active in the bond market, where the $35 million we allocated continued our two-year trend of gradually increasing our exposure. The Bank of Canada is expected to continue to cut interest rates, which would be supportive of bond prices, and government and high-quality corporate bonds typically offer diversification benefits in periods of elevated volatility.

Nearly $30 million was added to our private debt exposure, and the Investment Committee is currently engaged in due diligence on a handful of new opportunities. The asset class remains an attractive home for capital, given its combination of floating rates, interest rate floors and yields in the 6-9% range. If economic conditions soften, banks will be more reluctant to lend, further tilting the competitive landscape towards private lenders.

We allocated $19 million to public equities in the first quarter and an additional $20 million was deployed on April 8th. Market volatility will continue to be used to tactically add to our public equity exposure. It is important to “buy when others are selling” and with the benefit of hindsight, we can candidly admit that in recent pullbacks, we could have been more aggressive in doing so.

Smaller allocations were made to a new private equity manager as well as to one of our longstanding multi-family residential real estate managers. Currently, our Balanced Mandate has a 34% weighting in private asset classes, and the benefits they provide from a portfolio structure standpoint become increasingly evident in periods of public market volatility.

While the world remains unpredictable, we remain consistent.

The world is neither stable nor predictable. However, we always remain in control of our response to current challenges. Be assured that our approach to protecting and managing your wealth will remain consistent and predictable regardless of the political climate, the state of the economy, investor sentiment or the direction of public markets.

As always, we thank you for your continued trust and support.