Recent market volatility has been intense, with daily swings of several percent becoming normal. As our update two weeks ago highlighted, “We can expect rapid moves and reversals: one day, fears of a tariff-driven recession will send stocks lower; the next, a policy shift could spark a rebound.” That is what has been happening.
For long-term investors, turbulent periods are part of the journey, and volatility largely noise. Long-term returns are driven by starting valuations, which remain attractive outside the US. According to a recent Goldman Sachs report, European equities are valued at the 48th percentile and the UK at the 39th percentile relative to their historical norms, while the U.S. stands at a pricier 84th percentile.
www.gspublishing.com/content/research/en/reports/2025/04/08/0bf285f5-8d4a-478c-843f-4b4ea81256d5.pdf
In the report, Goldman Sachs also examines the trajectory of the current U.S. bear market and the conditions needed for a sustained recovery, which include:
1. Lower valuations.
2. Extreme negative investor positioning.
3. Policy support, such as interest rate cuts.
4. Signs of improving economic growth.
These conditions are not yet met. Goldman suggests that while this bear market—which was triggered by the tariff shock—is unlikely to be prolonged or severe due to the absence of major structural imbalances, a further valuation adjustment may be necessary. The S&P 500’s P/E ratio, currently at 19.4x, is significantly higher than its troughs of 14x in 2018, 13x in 2020, and 15x in 2022.
In contrast, our portfolio’s stocks mostly trade at a P/E of 10x or below, shielding it from the need for a significant valuation correction. For us, the performance of the European economy in 2025 and 2026 will be a more critical medium-term driver; short-term fluctuations should be ignored.
Despite the volatility, our portfolio has maintained a 9 percentage point outperformance against the MSCI World index this year. I aim to build on this lead through the remainder of 2025 by staying focused on undervalued opportunities with good fundamentals.
𝟮𝟬𝟮𝟱 𝗽𝗲𝗿𝗳𝗼𝗿𝗺𝗮𝗻𝗰𝗲
@triangulacapital +3.0%
SWDA.L -6.0%
𝗣𝗼𝗿𝘁𝗳𝗼𝗹𝗶𝗼 𝗰𝗵𝗮𝗻𝗴𝗲𝘀 Grainger was sold, Enel bought.
