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Bridgehampton Group August 2025 Investor Memo
As global equities hit new highs, a new fear of heights permeates the financial media and investor conversations. To be sure, euphoric behavior in several pockets of financial markets - including the momentum-driven arenas of crypto-currency and IPOs - warrants caution. US stock-market momentum currently depends to a significant extent on momentum in the AI theme. The largest of the AI-related companies generate impressive cash flows and can weather a downturn in the equity market. Yet many stocks in the AI space appear speculative and depend on benign capital markets for funding. Purely thematic momentum, whether in stocks, meme stocks, coins or other assets, can break down rapidly. The old dictum “be fearful when others are greedy – and greedy when others are fearful” is always apt.
Yet a broader view of equity markets offers striking contrasts. Sentiment is far from universally positive. The global economy has yet to derail; indeed, signs of improving growth continue to multiply. From the violent, massive selling pressure of early April, a “fear of missing out” propelled a recovery of prices to fresh peaks. Yet the profound shifts in policy ushered in by the US administration leave many investors more worried than usual.
We are equally struck by the highly divergent market reactions to recent earnings and management commentary. We don't recall a recent period when so many binary reactions occurred in the space of a few weeks...This means that the set-up for portfolio rebalancing may actually be favorable at present, as valuation gaps widen and crowding in certain sectors leaves other sectors under-valued. For all the worry about “bubbles,” one can barely keep up with the number of potentially interesting situations existing today.
The US market rally that has run since mid-April is broad-based and supported by earnings growth and shareholder returns. Much is made of the US market’s concentration in big tech stocks: the 10 largest stocks represent 40% of the S&P 500 index’s value, and 8 of the 10 are tech companies. Yet financials, industrials, consumer goods and services have all contributed to this year’s gains. Even if AI-stock momentum goes into reverse, the entire US equity market isn't necessarily doomed to poor returns.
- In our view, the existence of a broad set of relatively inexpensive, high-quality assets favors rebalancing over raising cash. One risk to this approach is that momentum persists and leaves inexpensive assets trading cheaply. Moreover, the trade-off for better-than-expected growth could be a resurgence of inflation, and which could raise borrowing rates and negatively impact asset prices. We acknowledge these risks and believe they are worth taking in the current market environment.
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.
Ingalls & Snyder is a registered investment advisor and broker-dealer based in New York City. We provide investment management and related services to private clients and institutional investors.
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