FFM Fund Newsletter - Apr 2025

April 2025

Dear Friends, Dear Investors,

As we enter the second quarter, markets have been significantly shaken since the beginning of April by the announcement of new U.S. tariffs, particularly high and, to say the least, relatively arbitrary in their calculation. While the immediate impact was a sharp increase in volatility, Donald Trump's announcements on “Liberation Day” (April 2) only exacerbated trends that were already emerging in March.

Indeed, March was marked by a persistently uncertain environment. Geopolitical tensions, doubts about global growth, and hesitation around monetary policy created broadly negative market performance, further amplified by rising volatility. While Europe had been significantly outperforming the U.S. since the start of the year, European indices also came under pressure in March.

Today, uncertainty remains. While Trump has announced a 90-day pause, at least for countries that have yet to retaliate, the overall picture remains blurry. Strong, and at times contradictory, statements continue to create confusion, leaving investors with limited clarity. As a result, volatility remains high, and short-term positioning remains particularly challenging.

There are valid concerns about a possible recession, especially in Europe, where growth is already weak, and where the new tariffs could further worsen the situation, particularly in Germany. In the United States, despite a slowdown that began in late 2024, the economy remains solid and would require a much deeper shock to enter into recession. The U.S. has experienced several sector-specific slowdowns in recent years (energy, tech, real estate), none of which turned into a full-blown crisis. So, while the environment is clearly uncertain, a U.S. recession is not, at this stage, the most likely scenario.

Despite heightened volatility and the potential fallout from early-April trade tensions, our investment approach remains driven by a strong conviction: the strength of quality companies always prevails over market noise. Naturally, our positions have been affected, and a few names such as EssilorLuxottica, Schneider Electric, and Apple have temporarily underperformed due to their exposure to global trade. However, these short-term adjustments do not call into question the intrinsic quality of these companies.

Our portfolios remain built around robust companies, leaders in their sectors, with high profitability and resilient business models. We steer clear of low-margin or highly cyclical sectors, favoring players like Hermès, Air Liquide, and Visa/Mastercard, which offer strong revenue visibility and significant pricing power. In semiconductors, a strategic sector that may remain less affected by tariffs, our positions continue to perform well (notably ASML, Nvidia, and Broadcom).

It’s also worth noting, although it went largely unnoticed amid the chaos, that Alphabet has just confirmed it will invest $75 billion this year in Artificial Intelligence (AI). While many sectors are slamming the brakes, AI clearly remains a top priority.

This announcement from Alphabet is significant: if there's one race the U.S. cannot afford to lose to China, it's the race in AI. We believe we are only witnessing the early stages of the AI revolution, and we plan to remain invested in this major long-term theme for years to come.

In summary, we remain confident in our approach: the current volatility does not undermine the fundamentals of the companies we select. These periods are demanding, but they highlight the importance of focusing on quality, profitability, and long-term vision. They also offer opportunities, and we are paying close attention. 2025 will likely remain a volatile year, full of challenges for investors and the companies we follow, but also rich with potential for recovery.

Best regards,

Your CaridaB Group Team