Dear Investors,
Volatility Introduction
Volatility – If you’re feeling uneasy about the markets this year, you’re not alone. Every headline seems to shout the same message: “Stocks are crashing!” “Recession is coming!” “It’s time to get out!” But here’s the thing – I’ve seen this movie before.
And as a global macro investor, I’ve learned something important: the best moments to invest often look like the worst ones.
There’s a strange comfort in knowing that what feels abnormal is actually quite common. Markets rise and fall – it’s their nature.
But fear magnifies everything. This year, the noise is louder, the fear is sharper, and the headlines are crafted to trigger emotion rather than reflection.
But we are not here to react. We are here to understand.
Let me walk you through what’s really going on beneath the surface in 2025.
Not with jargon or fear, but with facts, data, and a fresh perspective. Because when we zoom out, we start to see opportunity – not chaos.
And I want you to see it too.
So grab a coffee, take a breath, and follow me through what could be one of the most misunderstood market moments in recent years.
I promise – this is the type of environment where legends are born, where careers are made, and where those with courage can thrive.
The more the world panics, the more critical it becomes to focus on clarity, patience, and principles.
Market Drops Aren’t Crashes – They’re Patterns
Yes, the S&P 500 fell 10% in just 16 days. It was the fifth-fastest correction since 1950.
But that’s not an anomaly. That’s a textbook market move – sharp, sudden, and emotional.
There have been 38 corrections of 10% or more since 1950. 26 of them occurred while the economy was still growing.
And in those cases, the market bounced back with a +13% average gain over the following 12 months. Why? Because the market tends to overshoot in both directions.
Corrections like these tend to bottom within 44 days, and it usually takes only 6–7 months to recover to new highs. Sometimes faster.
History shows that during non-recessionary corrections, the S&P 500 not only rebounds – it thrives.
What’s more, these corrections often trigger institutional repositioning.
Fund managers rebalance portfolios, reallocate across sectors, and begin putting sidelined capital to work.
This invisible shift often sets the stage for surprising rallies.
Right now, we might be standing in the middle of that cycle. If history is a guide – and it often is – these dips are setups, not disasters.
And remember, what matters most isn’t what the market does next week. It’s where it goes over the next 12, 24, or 36 months.
If you invest for headlines, you’ll always be late. If you invest with vision, you’ll always be early.
Lower Prices, Better Value – A Rare Setup for Smart Investors (Volatility Update)
The S&P 500’s forward P/E ratio dropped from 22.5x to 18x. That’s not just a number – it’s a reset.
It means that you’re paying significantly less for the same business performance.
We’ve seen this before. In 2018, valuations fell sharply – but no recession followed. The market then rallied +29% the following year. That’s not theory. That’s precedent.
And it’s not just the S&P. Small-cap stocks and high-growth tech companies – often the first to sell off – are now trading at one-year valuation lows.
The opportunity is spreading across sectors. Healthcare, industrials, energy – even defensive consumer staples are flashing entry points.
In my experience, valuation resets combined with strong earnings are like spotting dry wood in a forest – you just need a spark.
And this time, there might be several. Earnings surprises, positive policy shifts, and lower interest rates could each light the match.
It’s during these valuation resets that generational wealth is quietly built – not loudly announced.
Everyone’s Afraid – And That’s My Favorite Signal
According to the AAII Sentiment Survey, over 60% of retail investors are bearish. That’s an extremely rare reading.
When sentiment hits these levels, we’re either already at or very close to the bottom.
Franklin Templeton’s Fear & Greed Index agrees. It’s currently flashing levels we haven’t seen since March 2020 (COVID panic) and October 2008 (global financial crisis).
Both times? Extraordinary buying opportunities.
Sentiment isn’t just an emotional barometer – it’s a psychological edge. When crowds panic, markets become inefficient.
And that inefficiency is the reward for those who can stay rational.
Markets are emotional machines. And right now, they’re overwhelmed by fear. As a macro investor, I know that extreme sentiment disconnects from fundamentals – and when it does, price becomes the opportunity.
I’m not interested in where the crowd is running – I’m looking where they’re not.
Volatility Isn’t the Enemy – It’s a Portal to Value
The VIX (Volatility Index), Wall Street’s fear gauge, recently hit 29.57. It’s been a while since we’ve seen a spike like this – and that matters.
When the VIX (Volatility Index) crosses above 27.8, it typically signals panic. But it also signals that the market is flushing out weak hands.
A Volatility Index spike to this level has preceded +19% average returns over the next year.
Volatility doesn’t mean sell. It means look closer. Because price dislocations only happen in storms. And if you’re building for the long term, storms are when the best trades are made.
Remember: volatility is a feature of risk assets, not a flaw. It’s the admission price for future reward.
Learning to embrace it is like learning to navigate waves – not run from the sea.
Don’t Just Chase Dividends – Look for Companies That Think Ahead
A lot of investors cling to dividends in uncertain times. And I get it – a quarterly cash payout feels safe. But chasing the highest yield can be dangerous.
From 1990 to 2024, companies with the highest dividend yields often ended up underperforming.
Many were overleveraged, overcommitted, and eventually had to cut or suspend payouts, disappointing shareholders.
That’s why I look for income growers – companies that don’t just pay dividends, but grow them, reinvest wisely, and buy back shares.
In 2024, U.S. firms spent $1.1 trillion on buybacks, a 14% increase YoY. That’s capital efficiency at work.
A smart company doesn’t just hand you cash. It multiplies it in the background – quietly and consistently.
And those quiet compounding forces are often the strongest allies in volatile markets.
The Quiet Power of Income Growth Over Time
Income growers don’t make front-page news. But they make portfolios stronger.
In the Russell 1000 Index, these companies outperformed high-yielders in revenue and earnings growth from 1990 to 2024.
They’re the tortoises in a market full of hares. They survive downturns, take market share during recessions, and come out the other side stronger.
I don’t just want yield. I want sustainable growth of total shareholder return.
Over a 10-year horizon, the compounding effect of reinvested dividends and steady buybacks can lead to exponential returns – far outpacing the flashy, high-yielding names that burn out fast.
Redefining Value: The New Macro Lens
As someone who’s spent years tracking global cycles, I’ve learned to abandon rigid models. Traditional “value investing” still has a place – but it needs refinement.
A company might look expensive at a glance. But if it’s growing free cash flow by 30% annually, that’s value.
Conversely, a “cheap” company in a dying industry might be exactly what it looks like: a trap.
Today, I dig into sector-specific models, customer acquisition cost, product margin trends, and cash reinvestment rates.
Because in 2025, value is no longer about price – it’s about potential.
True value is found in forward motion – in business models that are adapting, not just surviving.
It’s found in leadership that allocates capital wisely and communicates transparently.
And it’s found in misunderstood companies that have yet to be re-rated by the market.
What the Data Really Says About the Economy
Let’s get something straight. Despite the noise, the U.S. economy isn’t crashing. It’s adjusting.
We added 275,000 jobs in February, well above expectations. Inflation cooled to +2.6% YoY, down from 3.1%.
And the Fed is expected to cut rates three times this year, creating a softer macro backdrop for risk assets.
Consumer spending remains resilient. Business investment is holding up. And housing data, while mixed, shows pockets of stabilization.
These aren’t recession signals – they’re signs of a cooling, not collapsing, economy.
If this were truly the start of a recession, we’d be seeing job losses, contracting earnings, and aggressive Fed tightening.
We’re seeing resilience. And historically, when markets fall during a non-recessionary environment, they recover quickly.
In 2011 and 2016, similar setups occurred. And in both cases, the market gained more than 20% over the following year.
The Market Is Expanding – And That’s a Bullish Sign
This market is changing. Not collapsing – shifting.
The equal-weighted S&P 500 is now outperforming the cap-weighted index by over 2.3%.
That means performance isn’t just coming from the top 10 mega-cap stocks. It’s broadening.
In Q1, 490 out of 500 S&P companies outperformed the giants. That’s a healthy rotation. It means new leadership is emerging, and the market is finding balance.
And it’s not just a U.S. story. European equities are gaining momentum. Emerging markets are showing early signs of revival.
This is no longer a one-engine market. It’s becoming a multi-engine aircraft – and that means broader opportunity for those who know where to look.
What I’m Doing – And What You Might Consider
I’m not sitting this one out. I’m active – but patient. Strategic – but bold.
I’m buying companies with clean balance sheets, growing earnings, and a plan.
I’m avoiding the hype and digging into cash flow trends, management decisions, and capital allocation discipline.
When volatility spikes, I don’t run. I listen. Because markets talk loudest when emotions peak. I’m not chasing the trade of the day.
I’m building exposure for the next decade.
So what might you consider? Step back from the noise. Reassess your exposure. Trim what no longer fits your strategy.
Add where dislocation meets durability. And most of all – stay in the game.
Because the best rewards in investing go to those who stay present while others disappear.
This Is the Setup You’ve Been Waiting For
I know this isn’t easy. The fear is real. The headlines are loud. But ask yourself – when has panic ever built wealth?
The hardest moves – buying into corrections, staying calm in spikes, ignoring short-term noise – are the ones that separate amateurs from professionals.
2025 is not a market to run from. It’s a moment to understand. And if you can see what others don’t, you’ll earn what others won’t.