New Year Investor Memo: 2026‍

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‍2025 highlights:

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Ø  Strong returns across global equity markets

o   The benchmark S&P 500 rose by +17.9%

o   Non-US equities (EAFE) +31.9% in USD

Ø  Prices of precious & industrial metals surged

o   Gold +64%, Silver +144%, Copper +39%

o   Energy and ag prices softened, easing inflation concerns

Ø  Corporate bonds posted high-single-digit returns

o   Interest rate cuts and falling inflation metrics supported bond prices

o   Yield levels have dropped significantly over the past 9 months

Ø  US$ weakness

o  The US dollar weakened by -9.4% in 2025, bolstering non-US asset returns as well as specific commodities

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Lessons of the past year in the markets

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Strong 2025 returns were hard-won. The March-April period of last year proved a pivotal moment for portfolio managers. As apprehensions over trade policy, AI spending and federal budget cuts amplified, market prices slumped. US policy changes, broadly welcomed in late 2024, now seemed aimed at upsetting the trade and investment flows which underpinned global prosperity. The extreme tariff rates announced in early April triggered fears of a shutdown of global trade, reminiscent of the pandemic area.

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Markets reacted in similar fashion to early 2020. Between mid-February and mid-April 2025, the S&P 500 declined by 18% (near 20% intraday), while the tech-oriented Nasdaq index fell by 23%. We should recall how we felt and behaved at the time (less than one year ago). The period was marked by near-excruciating attention paid to trade and tariffs. A Reuters article from April 5 (see S&P 500 Loses $5 trillion in Two Days in Trump Tariff Selloff) charted the S&P 500’s gyrations in Trump terms:

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During the April sell-off, few traditional “safe havens” proved defensive when one needed them most. Treasury bonds provided no shelter as yields rose (prices declined), while the US dollar declined 8% in the space of three months. The return on gold was uneven, though many defensive stocks gained despite the global turbulence. US investors exposed to foreign assets benefitted from unexpected currency gains.

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Following a tense few days in early April that included strains in the US Treasury market and a depressed and highly volatile stock market, a relaxation of tariff threats signaled the bottom. The US benchmark index subsequently rebounded by 37% through year-end. Many of last year’s highest-returning stocks rallied by 100-200% or more – though only after enduring wrenching sell-offs (as much as 50-70% in the case of certain chipmakers and data-center equipment suppliers).

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Our biggest risk in April 2025, as we considered it, was not volatility but time. Keeping portfolios invested – and redeploying capital quickly in a period when prime assets trade at deep discounts – is vital. Despite clear bargains on offer, investors in a time of panic also need to consider the risk of further short-term price declines. Indeed, the easiest course of action in early April 2025 – a course taken by many managers and investors – was to avoid further damage by liquidating assets. Had the market slump lasted months instead of days, the liquidators may even have looked smart.

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At any given time, we are keenly aware of the surrounding policy and macro-economic environment (and not only in the US). Our portfolio decision-making, however, relies primarily on our assessment of business earnings growth relative to valuation. We continuously evaluate high-quality assets where we are well-paid to take risk – and consider sales of those where we are not. Most often, the risks to us as buyers are short-term in nature, whereas the potential payoff is long-term.

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Though not infallible, this focus served us well in past crises (including the Covid selloff in March 2020) – and it served us well last year. Market panics offer unusual advantages to those willing to think about compound returns beyond the next week or statement period. We often have the opportunity to “upgrade” our portfolios in these chaotic moments. When the next sell-off occurs, we expect that the same approach will prove beneficial.

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The current market environment & portfolio diversification

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A key component of our approach involves the continuous balancing among different types of equity investment. We keep an open mind with respect to contrasting investment situations. Consider, for instance, the diversification inherent to building portfolios composed of the following two types of asset:

·      A high-growth provider of innovative database technology, whose valuation does not appear to reflect the full potential of future business growth. This company benefits from high customer retention. As AI-related usage translates to higher revenues, the company should benefit from high operating leverage.

·      A 0-growth provider of middle-shelf consumer goods, and whose valuation does not appear to reflect both its enduring competitive advantages and, crucially, the potential for highly profitable simplification of brands and manufacturing centers.

Balancing such different profiles enhances, we believe, the diversification benefit of our equity strategies. Of the two, we will add to the type which offers the best return potential relative to risk at then market prices.

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Much of our current analytical work focuses on “defensive” assets. This cohort of companies enjoy persistent competitive advantages even when they are mismanaged for years, or when they face protracted cyclical challenges. Despite strong market returns in 2025, many high-quality stocks performed well below average (and many declined). Several defensive equities strike us as particularly appealing today, given both attractive valuations and the neglect by investors attracted primarily to stocks with market-price momentum.

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At the same time, even as stocks appreciate strongly, we consider carefully the reasons for which strong performers have risen. Such gains are often justified, and investors may still underestimate additional drivers of future earnings. Thus, even as we incrementally shift focus toward defensive names, several of our holdings compete among the growing periphery of AI beneficiaries. We are sensitive to the risk that valuations of such companies may be swollen by hype over a new technology. In our view, as this relatively new technology evolves, we expect that business opportunities and risks will shift, too. There remains significant potential for a new set of winners in the rapidly-evolving AI space.  

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We are grateful for the confidence you have placed in our abilities. We welcome your observations and questions, as always.

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Sincerely,

Bridgehampton Group

For questions or follow-up, please reach out to any member of our team. https://www.ingalls.net/bridgehamptongroup/about-us

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Ingalls & Snyder, LLC, is an investment advisor registered with the U.S. Securities & Exchange Commission and a FINRA member broker dealer. This material is being provided to you for informational purposes only and is not intended to be a general guide to investing, or as a source of any specific investment recommendation and makes no implied or express recommendation concerning the manner in which any account should be handled. Any investment program involves certain risks, including loss of principal, and no assurance can be given that any specific investment objective will be achieved.

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