Investing Perspectives Q1 2025
Say what you will, but the start of 2025 has been nothing short of dramatic. Over the past few months, we’ve witnessed a flurry of tariff announcements from the Trump administration—culminating on April 2 with the ironically named “Liberation Day”, when the U.S. unleashed a wave of tariffs that far exceeded expectations in both scope and scale.
While the U.S. has already rolled back some of these measures, at least temporarily, the remaining tariffs still represent one of the most significant de facto tax increases on American consumers in recent memory.
This moment echoes a past chapter in U.S. history. The last time we saw protectionism on this scale was in 1930, with the passage of the Smoot-Hawley Tariff Act. You’ve likely never heard of Senator Reed Smoot and Representative Willis Hawley, and for good reasons. If anyone remembers them today, it’s either as a warning against the perils of tariffs or as part of actor Ben Stein’s famously flat delivery in the classic 1986 movie Ferris Bueller’s Day Off.
In an effort to shield U.S. farmers and manufacturers, Smoot-Hawley raised tariffs on over 20,000 imported goods, with average rates on taxed imports nearing 59%. The policy backfired. More than 25 countries retaliated, global trade collapsed by 60% between 1929 and 1934, and the U.S. economy shrank by roughly 32% from 1929 to 1933.
Of course, today’s economic environment is vastly different, and comparisons to the past should be made cautiously. But a broad consensus among economists holds that tariffs tend to increase consumer prices and reduce economic growth—while delivering limited, if any, long-term benefits. Turning back the clock may hold political appeal, but from an economic standpoint, the picture is far more complicated.
Looking ahead, the situation remains fluid and subject to rapid shifts that will likely be driven by the evolving policy direction of President Trump. That said, we’ve seen clear signs of economic pragmatism in the near-daily revisions, exemptions, and delays to previously announced tariffs. These adjustments have been necessary to prevent sharp price increases, production disruptions and job losses. Take the auto industry, for example: its global and highly integrated supply chain makes it virtually impossible to fully reshore manufacturing to the U.S. without severe consequences for cost and output.
Our base-case view is that negotiations will proceed on a country by country, sector by sector basis, and that the final scope of tariffs will end up being far more limited than the current rhetoric implies. However, the longer-term consequences may be more subtle and far-reaching: a loss of trust in the U.S. as a reliable trading partner and steward of the rules-based global order. This erosion of confidence could weigh on business investment and long-term growth, and reduce productivity as companies make defensive, suboptimal investment decisions to navigate trade barriers.
Another risk on the horizon is stagflation—a word we haven’t heard much since the 1970s. It refers to a troubling mix of stagnant economic growth, rising inflation, and elevated unemployment. Normally, slow growth and job losses coincide with falling prices. But tariffs introduce a supply shock that pushes prices higher even as economic activity slows.
The key question will be whether the inflationary effects of tariffs are temporary—or if they trigger a broader and more sustained rise in prices. This would place central banks in an especially difficult position: faced with rising inflation and weakening growth, their usual response of cutting rates would become far more complicated.
Given this backdrop of geopolitical uncertainty and shifting policy, the volatility we’ve seen in equity markets is hardly surprising. We’ve experienced some of the largest daily swings in major stock indexes—approaching 10% in both directions—since the early days of the COVID-19 pandemic and the 2008 financial crisis.
At the same time, U.S. Treasury bond prices have come under unexpected pressure, leading to a sharp spike in yields across the curve. This shift is already affecting borrowing costs across the economy, from corporate lending to mortgages, as markets adjust to the evolving landscape.
Despite these dramatic swings, our client portfolios have experienced declines of only a few percentage points on a year-to-date basis through mid-April. This stability is due in large part to the diversification built into our portfolios—across both public and private asset classes—as well as our disciplined avoidance of speculative corners of the market.
We’ve also taken proactive steps within our publicly traded equity portfolios to reflect the new economic realities and capture opportunities emerging from recent dislocations. In periods of stress, strong businesses with durable fundamentals often become mispriced, creating compelling long-term investments.
In turbulent periods like this, it’s worth remembering the old adage: “time in the market” is more important than “timing the market”. While this may sound cliché, history shows it’s far easier to exit a falling market than to time the right moment to re-enter before a recovery. The rebound in 2020 offers a clear example—markets began recovering well before the broader economy showed signs of stabilization.
Maintaining a long-term perspective, grounded in a disciplined investment process, has always been at the core of how we manage client portfolios—and it will continue to be our guiding approach through whatever lies ahead.
Lastly, we’re delighted to announce the newest addition to the Bridgeport team, Daniel Bain. Daniel brings decades of investment experience as the founder of Thornmark Asset Management, a firm he built into a respected and enduring presence in the Canadian investment landscape since the late 1990s. He has now transitioned his clients to Bridgeport and joins us as Chief Strategy Officer, Private Wealth & Portfolio Manager. We’re thrilled to welcome both Daniel and the Thornmark community, and we know he’s looking forward to connecting with clients—new and longstanding–in the months ahead.
As always, please don’t hesitate to reach out with any questions or concerns.
Yours truly,
John Fisher