Really Hard to Plan...
The US tariffs have added significant uncertainty to the global economy. The situation has changed so quickly that it is hard to keep up. After a rough week in early April, the US Administration decided to provide a 90-day reprieve on reciprocal tariffs while country specific trade deals are negotiated (the original global tariff of 10% remains on all countries). This is an extremely tight schedule, and we doubt that much will actually be accomplished before the deadline. This real issue has already landed and will not change with negotiations: it is now extremely difficult for corporate management to make investment and capital allocation decisions. It is much easier for them to just sit and wait for a while (months? years?) until this plays out.
It is still very early, but we are seeing this in high frequency data already (Figure 1). Recent Empire Manufacturing purchasing expectations (i.e. New York companies) was very bad. Furthermore, Figure 2 presents a more material concern. We have read news reports that shipping to the US has materially dropped. While this is anecdotal, as you can see, most bulk ships are holding in Asia and we would normally expect more balance between the west coast of North America and Asia.
Paradoxically, we are still in earnings season and there are also a number of companies that have released great results. Either they offer a product or service that does not have a tariff applied or they are easily able to localize supply chain and production.
“This means that” as we noted last week, market volatility is a natural part of investing. The critical part of the investment environment going forward will be to truly understand the business and managements of these companies. We will have a chance to navigate through the uncertainty and make some great investments along the way.
National Instrument 31-103 requires registered firms to disclose information that a reasonable investor would expect to know, including any material conflicts with the firm or its representatives. Doug Johnson and/or Pathfinder Asset Management Limited are an insider of companies periodically mentioned in this report. Please visit www.paml.ca for full disclosures.
Changes in Leverage. We are increasing the asset ceiling to 2.0 times the market value of equity for Pathfinder International Fund and Pathfinder Conviction Fund to be consistent with Pathfinder Partners’ Fund and Pathfinder Resource Fund.
For more information, please follow the links above to review the fund term sheets.
*All returns are time weighted and net of investment management fees. Returns from the Pathfinder Partners’ Fund and Partners’ Real Return Plus Fund are presented based on the masters series of each fund. The Pathfinder Core: Equity Portfolio and The Pathfinder Core: High Income Portfolio are live accounts. These are actual accounts owned by the Pathfinder Chairman (Equity) and client (High Income) which contain no legacy positions, cash flows or other Pathfinder investment mandates or products. Monthly inception dates for each fund and portfolio are as follows: Pathfinder Core: Equity Portfolio (January 2011), Pathfinder Core: High Income Portfolio (October 2012) Partners’ Fund (April 2011), Partners’ Real Return Plus Fund (April, 2013), and Partners’ Core Plus Fund (November 2014).
Pathfinder Asset Management Limited (PAML) and its affiliates may collectively beneficially own in excess of 10% of one or more classes of the issued and outstanding equity securities mentioned in this newsletter. This publication is intended only to convey information. It is not to be construed as an investment guide or as an offer or solicitation of an offer to buy or sell any of the securities mentioned in it. The author has taken all usual and reasonable precautions to determine that the information contained in this publication has been obtained from sources believed to be reliable and that the procedures used to summarize and analyze such information are based on approved practices and principles in the investment industry. However, the market forces underlying investment value are subject to sudden and dramatic changes and data availability varies from one moment to the next. Consequently, neither the author nor PAML can make any warranty as to the accuracy or completeness of information, analysis or views contained in this publication or their usefulness or suitability in any particular circumstance. You should not undertake any investment or portfolio assessment or other transaction on the basis of this publication, but should first consult your portfolio manager, who can assess all relevant particulars of any proposed investment or transaction. PAML and the author accept no liability of any kind whatsoever or any damages or losses incurred by you as a result of reliance upon or use of this publication.