At AlbaCore, we focus on the long-term. As one of Europe’s leading alternative credit specialists, we invest in private capital solutions, opportunistic and dislocated credit, and structured products.
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Our philosophy is very simple. We are constantly searching for high quality businesses and when we acquire them, we will work relentlessly with them to create long-term sustainable value through innovation, ESG-led and proactive asset management.
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Leader in active quantitative equities across Australian equities, global equities, emerging markets and global small companies.
Backed by a unique blend of research, portfolio construction and risk management, focused on uncovering original insights and translating them into investment strategies that are active and systematic, aiming to generate alpha.
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Stewart Investors manage investment portfolios on behalf of our clients over the long term and have held shares in some companies for over 20 years. They launched their first investment strategy in 1988.
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Our team began the year with the thesis that inflation would remain stable and tariffs would hinder growth. We believed that the ongoing trade war would have a more severe impact on global growth than on inflation. As the effects of Trump's unexpectedly stringent Liberation Day announcements reverberate nearly halfway through the year, our views remain largely unchanged.
Tariffs may cause a one-off spike in inflation, but this heightened pace of increase in price levels would not be sustainable. Offsetting forces, such as low energy prices, would negate its impact. If higher prices are again passed through to end consumers by corporations, it would reduce demand, given how quickly price hikes in recent years have eroded consumer savings. Indeed, inflation has thus far been calm. Overall inflation has remained stable or even trended downwards. Year-over-year headline inflation as of March stood at 2.4%, down from 3.0% in January. Similarly, core inflation fell to 2.8% year-over-year, down from 3.3% in January.
In 2024, we held the view that US growth was already slowing down even before tariffs were announced. At this juncture, prolonged tariff negotiations will likely impede growth further as firms delay their plans while awaiting policy clarity. In our view, the additional damage done to growth has exacerbated the risk of recession. Uncertainties surrounding tariffs have weakened corporate budget forecasts and capital expenditure plans, though the effects may not be immediately apparent. With bankruptcy volumes already rising in 2024, we expect further weakness in the labor market, stemming not only from corporate layoffs but also from Federal government job cuts aimed at curbing hiring excesses from Biden's era.
Notably, there has been a shift in investment sentiment against the US. The rally in non-USD currencies year-to-date has been remarkable, driven by policy inconsistencies and uncertainties that have eroded investor confidence in the greenback. As events unfold, we are seeing signs of the US attempting damage control by softening some of its hard stances, such as those against China, since the start of April. Additionally, the sell-off in longer-dated Treasury bonds during risk-off conditions reflects a decline in confidence in US risk as the trade war continues.
While the Federal Reserve has yet to cut rates in 2025, citing a "wait-and-see" approach to assess the impact of tariffs before making any moves, we maintain a bearish view on the fundamentals of the US economy. We believe that sooner or later, the Fed will need to cut rates aggressively, and we hope it won't be too late. The longer the Federal Reserve waits, the larger the rate cuts will need to be eventually.
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