FFM Fund Newsletter - Jul 2025

July 2025

Dear Friends, Dear Investors,

You have to hand it to Donald Trump’s administration. They managed to have the One Big Beautiful Bill Act, or OBBBA, as it is formally known, in record time and within the self-imposed deadline of July 4. Just as important, the Section 899 – Retaliatory Tax Provision, which would have granted the U.S. government authority to impose a surtax of up to 20% on U.S.-source income (such as dividends, interest, royalties, capital gains) earned by foreign persons or companies, was scrapped from the final version, which was very important for foreign investors like us.

As to the bill itself, and regardless of one’s political opinion, it should be incredibly stimulatory for the US economy, as it extends existing tax cuts indefinitely (which is almost a first in US legislative history: normally, tax cuts always a sunset provision, but not this time). Anyone building a factory in the US will be able to benefit from 100% tax cuts on its costs, something that, again, has never been the case before.

Also, and for political as much as financial reasons, the deep cuts in the Medicaid system will only start in 2028, when it will no longer be Donald Trump’s problem.

All this furthered the sharp and fast rebound US equities had already experienced since April, while European equities took a breather. With US markets back at all-time highs, Donald Trump again feels like he can play with house money and has reignited the tariff debate, imposing 50% tariffs on copper imports and on Brazil, while threatening 30% tariffs on the European Union (which is higher than the original 20% announced in early April).

Negotiations are still ongoing with the European Union and we shall see what happens. Markets, however, do not seem too troubled yet, as recent experience has shown that Donald Trump was more bark than bite. We can only hope this keeps on being the case if markets do not correct anymore, which was the only reason tariffs were put on hold in the first place.

It is also worth noting that, in this context of fiscal stimulus and persistent external imbalances, the US dollar has shown notable weakness, which could, over the medium term, support non-US assets and enhance the relative attractiveness of certain European equities.

In this environment, where US fiscal policy is increasingly used as a tool of geopolitical strategy and valuations remain elevated, we remain committed to our approach. Now more than ever, it is essential to carefully select the companies we invest in, those with strong margins, sustainable growth, low debt, and a clear ability to allocate capital effectively. And if tensions continue, we will keep a close eye on European opportunities, especially where they offer comparable quality to their US counterparts.

Best regards,

Your CaridaB Group Team