April 2025 - Monthly Portfolio Update #6
April 2025: a true rollercoaster ride...
Hi, Investor 👋
I’m Jimmy, and welcome to the sixth edition of the Stellar Capital Management newsletter! Each month, I share high-conviction investment ideas, aiming to cut through the noise and offer a fresh take on the markets.
In this issue, we’ll review April’s performance, explore key macro trends, and walk through how we're positioned heading into Q2.
In case you missed it, here are some recent insights:
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Monthly Introduction:
April has come to an end... and we made it.
Congratulations to the investors who stayed the course - without panic.
If you thought March was eventful, April had a few surprises of its own…
Shortly after the emblematic “Liberation Day”, the VIX - the market’s main volatility index - spiked to its highest level since the COVID crisis in 2020.
Meanwhile, the Fear & Greed Index nearly broke the dial, plunging to 15 - deep into extreme fear territory.
Thanks to the strategic shifts we made in prior months, our portfolio performed exceptionally well in April: while the S&P 500 declined -1.14%, Stellar Capital Management delivered a gain of +4.85% - generating an alpha of +5.99 percentage points in just 30 days.
In 2025, our portfolio is up +8.0%, compared to a -5.3% drop in the S&P 500 (alpha generation of 13.3 p.p.).
Since inception, our portfolio has returned +120.5%, while the S&P 500 is up +45% over the same period (+75.5 percentage points of long-term alpha).
In other words, since inception, our portfolio has delivered a compound annual growth rate (CAGR) of +40%, compared to +18% per year for the S&P 500.
This reflects not only strong results, but also consistent and disciplined execution over time.
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Is It Time to Worry?
April marked a turning point for the U.S. economy: GDP contracted by -0.3% in Q1 2025, signaling the cumulative impact of tariffs, global slowdown, and weaker domestic consumption.
Labor market data, however, remain firm. Market consensus points to 125,000 new jobs in April, with the unemployment rate expected to hold steady at 4.2%. Weekly jobless claims continue to hover at low levels, suggesting no immediate stress in employment dynamics.
In contrast, sentiment data continue to deteriorate. April PMIs dropped to levels last seen during the pandemic, especially in services and capex expectations. The Fed’s Beige Book showed that 4 out of 12 districts are now reporting declining activity - up from zero earlier this year.
The auto sector is still adjusting to the April 2nd tariffs, with vehicle sales falling from 17.8 million SAAR in March to 17.1 million in April. The data suggest a front-loading effect, as buyers rushed to avoid price increases.
In external trade, preliminary indicators show a pullback in Chinese imports and weakening inbound tourism. International air arrivals were down -4.8% y/y in February, affected by tariffs and geopolitical sentiment.
Outside the U.S., inflation is softening, creating room for monetary easing. At least 17 emerging market central banks are expected to cut rates in 2025, according to analyst forecasts.
Bottom line:
A negative GDP print, falling business sentiment, and persistent tariff pressure all raise the risk of recession in the second half of the year.
While the Fed is expected to hold rates steady in May, discussions around potential rate cuts are likely to intensify in the months ahead.
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Portfolio Overview:
As you already know, our portfolio is intentionally concentrated - reflecting our belief that generating alpha in a highly competitive market stems from focusing on a select group of high-conviction companies.
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