The surest test of discipline is its absence

“The surest test of discipline is its absence”

–Clara Barton

The stock market rallied strongly in the second quarter as uncertainty surrounding tariffs moderated. Equities fell sharply in early April following President Trump’s “Liberation Day” announcement causing the administration to quickly postpone the implementation of most of the proposed tariffs as the economic ramifications are reconsidered. Markets interpreted this delay as a sign that the administration would pursue its trade policy while also weighing its impact on the overall economy. As we enter the second half of the year, we have become cautiously optimistic that the economy will remain resilient and that the administration will consider the broader economic impact of policies. 

While we are more constructive regarding the investment environment thanks to moderating trade tensions, we have been proactive trimming overweight stock positions and in selling stocks that disappoint. Specifically, during the quarter we trimmed our holdings in Ecolab, Cencora, and MasterCard as their valuations were near the high end of historic levels. We sold our holdings in Pepsi and United Health Group for fundamental reasons. We added to our initial position in Nvidia that was taken in March and added a starting position in Meta and Alphabet in some client accounts, as the businesses give us exposure to artificial intelligence and its secular growth. 

We would be remiss if we didn’t emphasize that the current investment environment remains very fluid. New policies and changes to existing plans seem to arise almost weekly. We have never been proponents of market timing, and the current environment provides an excellent example as to why. Instead, we attempt to mitigate risk by keeping money clients may need in the near term invested in shorter term instruments like money market funds and treasuries. Long term money is invested in stocks of quality businesses that generate excess cash flow run by management teams we believe will reinvest surplus cash in shareholder friendly activities. The rapidly evolving environment has resulted in our trading more frequently than normal, but please know we remain committed to generating competitive investment returns while also mitigating volatility in the value of your investment accounts. Thank you for entrusting Ayrshire Capital Management LLC with your money and we look forward to speaking with you as the summer progresses.  

Sincerely,

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