Gnostic Global Portfolio Return for the Quarter Ended 3/31/2025.

The first fiscal quarter of 2025 was highly eventful from a geopolitical perspective.

On the heels of significant uncertainty about the access of goods into the United States and the tariff rates that may be assessed, the 3 major indexes in the United States ended red for Q1.

The DJIA closed out the quarter -1.3% down. The S&P 500 index closed out the quarter -4.6% lower. The NASDAQ Composite Index fell -10.4% in Q1.

As to the Gnostic Portfolio, it was very much a business as usual quarter. The portfolio ended fiscal 2024 with a value of $1,116.11 US per share and ended Q1 with a value of $1,212.81 US per share, a return of + 8.6%.

There was absolutely no rocket science involved in accurately forecasting the resumption of tariff concerns, post-reelection of Donald Trump as president.

In the first 4 year term of President Trump, he attempted, largely unsuccessfully, to move the American position away from a multi-decade platform of globalist largesse to one considerably more America-centric. Being a neophyte politician, President Trump’s first term ran headlong into the wall of vested interest, with lobbyists able to maintain centrist republicans on long-held policies, even when they did not directly benefit the majority of the American workforce. Many in the Republican party did not buy into the first term vision of change. After control of one legislative branch was lost to the democrats, President Trump found himself without the ability to meaningfully act upon his change mandate.

Now, after 4 years of reflection away from office, with time as the nemesis of intent, President Trump has chosen to operate with great urgency in his second term. He has realized that if he can push forward a change agenda quickly enough, his Republican colleagues might not have time to be bought off by lobbyist dollars, to be brow beaten into submission by media, to be circumvented by external, internationalist, pressures that seek to maintain status quo and use the American economy as a piggy bank to support/subsidize their own spending programs. Hence, an almost dizzying array of policy pronouncements have been made. Some are some purely diversionary, fluff distractions to confuse vested interests. Yet a central theme is evident; that the days of total, virtually unlimited cost and consequence free access, for foreign producers, into the world’s largest consumer market, are at an end. All that is unknown are the percentages of tariffs to be costed out. Why the investment herd didn’t anticipate the potential for upheaval is beyond me, the telegraphing of intent could have not been more plainly stated.

There will be “quid pro quo” between nations and America clearly intends to recapture a portion of manufacturing output offshored and nearshored. There is a simple bargain to be made, one already employed by every other country on the planet. Engage in direct foreign investment in the USA and that business will be fine. Do not, and prepare to pay an ongoing toll for access. Most countries on the planet are not the least bit globalist and only paid lip service to the notion of free or fair trade, leaving the US vulnerable, almost alone, in the true free trade space. The American government has wised up, if you cannot beat them, join them.

When no other country permits unrestricted access to their markets, when they espouse free trade but actively work to prevent trade within the most profitable sectors of their own economies, what possible domestic benefit is there for the American electorate to persist in having the the United States do so?

The rest of the world now proclaims the new US administration to be isolationist.

That is the inverse of the situation at hand; by adopting the same trade policies as the remainder of the world, the US joins the global modus operandi. After holding out, for generations, America is now abandoning the ideal that by serving as a beacon of free trade, other countries will join suit. This ideal has failed, because everyone else sought to game the system. What remains is national self-interest.

Tariffs add to the cost of doing business

They represent an expense, a direct transfer of capital away FROM a producer and/or consumer and TO the government. As with other nations, a portion of tariff payments to the government can be used to directly subsidize any Americans who may be hurt, in the short term, from pricing dislocations that might arise on the time required to “reshore” the intended number of businesses back to the United States. Foreign exporters might absorb a portion of the fee themselves via a reduction in their profit margins. Market actions within the major equity indexes are telegraphing that margins earned by foreign firms and multinational companies offshoring, nearshoring and exporting alike, will be hurt in the future. This is why indexes in general have fallen, not out of misplaced fear, but rather, as a realization that earning models need to respond accordingly.

I describe Q1 results for the Gnostic Portfolio as a business-as-usual period because this portfolio continually models for bad news and understands the impacts when bad news hits.

Companies with high margins, with market share dominance, with superior business models that were not primarily tied to export arbitrage, they were fine before the tariff talk, they will be fine going forward. Companies with low margins are never fine.

Unlike perma-bears, this portfolio remains fully invested at all times, investing for the climate and reporting on the weather. Positive quarterly share price increases were noted at Adyen NV (+4.2%), BJ’s Wholesale Club (+27.7%), EBay (+9.3%), Eli Lilly (+7%), Federal National Mortgage (+92.7%) Fomento Economico Mexicana (+14.1%), Grupo Aeroportuario Del Pacifico (+6%), Grupo Aeroportuario del Sureste (+6.3%), Lassonde Industries (+13.7%), Mastercard (+4.1%) Palantir Technologies (+11.6%), Solvay Inc (+11.3%), The Cigna Group (+19.1%), Union Pacific Corp. (+3.6%), UnitedHealth Group (+3.6%) and Visa Inc. (+10.9%).

Negative share price returns were evidenced at Canadian Pacific Kansas City Ltd. (-3%), Grupo Comercial Chedraui (-12.3%), Microsoft Corp. (-10.9%), Novo Nordisk (-19.3%) and Taiwan Semiconductor (-15.9%).

All other investments were either even on the quarter or were insignificantly positive.

There were no changes within the portfolio on the quarter, no sales and no additions, save for a few dividend reinvestments on equities in positive territory vs the prior quarter.