Winter in the Shade

Clients of the Firm,

“It was one of those March days when the sun shines hot and the wind blows cold: when it is summer in the light, and winter in the shade.”- Charles Dickens

March has arrived and with it the weather in New England shifts day to day. Temperatures ranged from a balmy sixty-one yesterday to predicted snow showers tonight. The stock and bond markets have taken their own March forecast from an ever-changing narrative of punitive tariffs, chaotic government dismantling and even a text stream divulging secret battle plans to the press. The makings of a Netflix show are now the day-to-day reality for investors. Winter in the shade indeed.

The first quarter of 2025 continues to experience volatility with the VIX spiking to 30 during the recent tariff selloff and ongoing market correction. So far, the sudden pullback remains within normative ranges for market corrections with the S&P 500 down -7.32% from its all-time high.

Prevailing narratives abound, from the austerity focus of DOGE, to the forthcoming extension of the 2017 tax cuts, to Fed rate setting and tariffs. Matters are further complicated by the abundant fight-picking with long-term allies through veiled and directed threats to trading partners. Ours is a time of uncertainty, a condition disliked by risk markets.

Should a more severe price dislocation occur, it will undoubtedly present a buying opportunity to purchase high quality assets at discounted prices. In the decades we have managed assets, this price distortion phenomenon has occurred several times, birthed out of chaos and invariably given episodic names: the Great Financial Crisis, the European Debt Crisis, the Debt Ceiling Debate, the Taper Tantrum, the Fed Pivot and the Covid Crash. Perhaps this episode will be called the Trump Tariff Tirade or some other clever moniker to appease the marketing gods.

Each episode with its fear-mongering narratives alongside price dislocation and loss clearing outcomes, presented unique buying opportunities in certain assets. They also afforded profit opportunities for hedges placed in times of perceived stability and unwound at moments of peak fear.

Executing through times like these as an active money manager and investor takes more than vigilance. One can act to capture future profit opportunities while others liquidate into a tempest of fear and uncertainty. One can also not act. The latter is perhaps the more challenging behavior both individually and professionally as external pressures can be applied to sell assets at the least opportune time. Almost always inaction or action as Warren Buffet says, “bordering on sloth” in market declines has resulted in better outcomes than selling at low prices and trying to chase returns later when markets have "stabilized”.

Choices should be driven by the long-term fundamentals of the investments we own. These investments should be made in a risk-tolerated allocation framework that allows the investor to be just that, an investor. This posture minimizes situations where we are forced or compelled to sell investments due to temporary uncertainty or event risk driven episodes. Instead, we should make rational decisions about why we own an investment and whether our long-term thesis is changed by events. This is the path to optimal long-term outcomes.

As we navigate the current and future environment, we will endeavor to seek “summer in the light” as Dickens penned. Opportunities to achieve positive investment outcomes will present themselves and we will search for those while staying within the risk tolerance guidelines we have developed with you. We look forward to the opportunity to continue to work hard on your behalf in that endeavor.

Sincerely,

Peter C. Wernau

President, CEO

Wernau Asset Management

http://www.wernauassetmanagement.com/

Office: 617.871.0029

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This letter contains general information that is not suitable for everyone. The information contained herein should not be construed as personalized investment advice. Past performance is no guarantee of future results. There is no guarantee that the views and opinions expressed in this newsletter will come to pass. Investing in the stock market involves gains and losses and may not be suitable for all investors. Information presented herein is subject to change without notice and should not be considered as a solicitation to buy or sell any security. Wernau Asset Management, Inc. ("Wernau Asset Management) is a registered investment adviser with its principal place of business in the Commonwealth of Massachusetts. Wernau Asset Management and its representatives are in compliance with the current registration requirements imposed upon registered investment advisers by those states in which Wernau Asset Management maintains clients. Wernau Asset Management may only transact business in those states in which it is registered or qualifies for an exemption or exclusion from registration requirements. This letter is limited to the dissemination of general information pertaining to its investment advisory services. Any subsequent, direct communication by Wernau Asset Management with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of Wernau Asset Management, please contact Wernau Asset Management or refer to the Investment Adviser Public Disclosure web site (www.adviserinfo.sec.gov). For additional information about Wernau Asset Management, including fees and services, send for our disclosure statement as set forth on Form ADV from Wernau Asset Management using the contact information herein. Please read the disclosure statement carefully before you invest or send money.