NYLI Epoch Capital Growth Fund Q1 2025 Commentary

2025-07-03 15:52:00 ET

Market Review

The MSCI World Index fell 1.7% over the first quarter of 2025. Equities sold off in the second half of Q1 as enthusiasm faded post Trump's inauguration, replaced instead by unease arising from tariff uncertainty, creeping doubts in the Artificial Intelligence ((AI)) secular growth story fueled by the release of DeepSeek, softer economic data, and depressed sentiment. Cyclical pockets expressed this hit, with discretionary industries underperforming many defensives. Caution was further indicated by the various downward revisions of growth forecasts by corporate and central banks alike, coupled with negative earnings revisions. The American stock market was the main laggard this quarter as the megacap tech names pulled back on reduced faith in the payoff of AI capex spending. U.S. markets were further plagued by tariff and policy uncertainty, which caused some rotation to favor ex-U.S. investments as well as revision upward of inflation expectations. Europe outperformed, particularly with the added boosts of German expansionary fiscal impulse, accommodative central banks, and a rally by European defense stocks in anticipation of increased military spending. However, European economic indicators remain sluggish, with muted growth forecasts and continued monetary easing attempting to combat it. Asian equity performance was more of a mixed bag over the quarter, with China and Hong Kong the standouts and Japan, Taiwan, and South Korea trailing behind. China and Hong Kong indices were particularly propelled by technology boons like DeepSeek's announced AI advancements and fiscal support for the sector. The region's economic data, however, reflected a slight claw back in retail sales and industrial output, but continues to show labor market weakness. The top performing sectors this quarter included energy (+10.1%), utilities (+7.2%), and financials (+6.1%)....

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