2025: Radical Uncertainty
Market movements have been volatile as we progressed through the first three months of 2025. Return sentiment has moved away from the US towards Europe and China. These are short-term movements for now, and we watch to see and possibly act on the longer term trends. We take a very forward looking approach to investing and try to position portfolios for 10years+ towards secular trends in technology, healthcare and biotechnology. There are other trends – these three are the ones we primarily focus on.
March was a challenging months for returns as investors took a pragmatic view around the difficulties of assessing the interaction of politics, markets and investments. Risk was definitely off in March, this trend could go on.
A key theme that developed during the quarter was radical uncertainty. It is worthwhile exploring that in a little more detail – the unknown unknowns, not normal uncertainty that is experienced from day to day but something different and less precise and more unknown. Trump 2.0 has instilled levels of randomness in US policy, this by deliberate design or otherwise The noise around tariffs whether for genuine trade initiatives, to extract concessions for geo-political positioning are all moving parts that in 2025 are change day to day often hour by hour. Markets have been re-adjusted from a bullish end to quarter 4 2024 to this level of radical uncertainty that Trump 2.0 has anchored fixed investment markets around. The recalibration of risk is taking place and it is interesting to observe those dynamics alongside central banking speak, which has also come in more uncertain, to some extent correlated to the political uncertainty. US GDP is being downgraded, and whilst inflation is coming down, it is still persistent and the last mile of the inflation drop is proving to be challenging.
This radical uncertainty has unnerved investment markets. Perhaps creating an inflection point and pivot that we need to understand better and take into account for our future thinking.
How do we currently think about such events. A few things to bear in mind. There still will be global growth this year, a lot of this growth led by the US and led within key sectors such as technology. The US is experiencing a ‘market correction’ and these do happen regularly. US corporate valuations are relatively expensive and so there is a reassessment there. Whether this correction leads to a more prolonged bear market phase is something we are closely trying to understand and then also effect change if there is merit in doing so.
It is also worth putting some context to the year so far, certainly context from a Binary Capital investment philosophical point of view. We are long-term investors. We invest with high conviction – we understand it is the only way to really invest to maximise risk and return management. As many great investors say, “And if you really see it [investment opportunities], put all your eggs in one basket and then watch the basket very carefully”.
We invest with a global thinking mindset and see returns more positive away from home markets. There is so much economic and investment disruption out there and we wish to be on the right side of these trades – such a healthcare innovation, biotechnology advancements and technological opportunities, for example in artificial intelligence (ai) further machine learning and quantum computing. This area of focus and research has not just been downgraded in the last few months. The opportunities here are exceptional, but one needs to take a long-term mindset to really take advantage of such and see through to the end, whenever the end is and whatever that means to investors.
If you do not have that long-term investment mindset then you will get caught up with market noise and random market movements that will only go to creating distractions, sub-optimal short-term and long-term returns and ultimately it takes us away from the conviction nature of our philosophy or what is true to genuine investing.
Our high conviction approach drives everything we do on the investment side.
There is a sense from the newsflow in the 1H of 2025, that markets will stabilise once more certainty is established and a fixed pattern of ‘chaos’ is established. We will see.
As noted, following a period of a few good years of returns investment markets may be going through a phase of change. We need to be aware of such changes, and react accordingly if this is a long-term trend.
For Q1 our returns overall held up relatively well as well as in absolute terms. It is only one quarter in a data set and we must not get carried away nor complacent with such information.
It is over years we must focus. At Binary Capital over the longer-term we have a top decile performance record and aim to always such credibility of risk and returns for clients at all times.
Saftar Sarwar
Chief Investment Officer
Binary Capital
