American Resilience Model Portfolio

Monthly Portfolio Review: March 2025

Publication date: April 3, 2025

Current portfolio holdings

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Executive summary

• The American Resilience portfolio returned -5.2% in March, slightly ahead of the S&P 500 return of -5.6%.

• Negative market sentiment, related largely to Trump’s tariff policies, continued into March, with tech-related stocks affected the most.

• In March, we added Mag Seven constituent NVIDIA (NVDA) to the portfolio after a sharp price decline.

• The worst performing stock in the portfolio was tech holding Oracle (ORCL). We see compelling value in ORCL at current levels.

• The best performing stocks in the portfolio were Williams (WMB) and Arch Capital Group (ACGL), which investors perceive as less vulnerable to tariff-related risks.

• Markets are now reacting negatively to Trump’s Liberation Day tariff announcements.

• We encourage subscribers to stay focused on company fundamentals and to think opportunistically and long-term.

Performance review

The American Resilience portfolio returned -5.2% in March, slightly ahead of the S&P 500 Index return of -5.6%. On a year to date basis through the end of March, the portfolio generated a total return of -0.5%, versus -4.3% for the S&P 500.

The top performing stocks in the portfolio in March were Wiliams (WMB), which returned 4%, and Arch Capital Group (ACGL), which returned 4%.

The worst performing stocks in the portfolio were Oracle (ORCL), which returned -16%, and Costco (COST), which returned -10%.

New portfolio position NVIDIA (NVDA) saw share price declines of approximately 13% over the course of March but was flat through the end of the month since its mid-month addition to the portfolio.

Tech valuations reset

After a promising start to the year, and on the heels of very strong returns in 2024 (with the S&P 500 gaining approximately 25%), March was a particularly difficult month for the stock market.

In March, we witnessed a continuation of a fairly intense sentiment shift that began towards the end of February.

As we write, this negative momentum is continuing, in the wake of yesterday afternoon’s tariff announcements. Additional commentary on these breaking developments will be provided to subscribers in the days ahead.

Optimism towards the Trump economic agenda, based on de-regulation, fiscal sanity, innovation and re-industrialization, has turned into anxiety over tariffs along with potentially disruptive federal spending cuts.

While the tech sector is not necessarily the area one would expect tariffs to impact the most, tech, especially mega-cap tech, was the part of the market that was hardest hit in March.

While the S&P 500 was down 5.6%, the tech-heavy NASDAQ Composite Index was down 8.1%. The largest tech stocks, as reflected by the Roundhill Magnificent Seven ETF (MAGS), which tracks the performance of the Mag Seven tech stocks on an equal-weighted basis, was down 10.4%.

S&P 500, NASDAQ, S&P 500 Value, Mag Seven

Total Return (March 2025)

It is worth noting that the S&P 500 Value Index was only down 3.0% in March. On a year to date basis through the end of March, returns on value stocks were slightly positive.

Value stocks largely consist of companies outside the tech sector that are in many cases quite sensitive to the economic growth outlook. The relative strength of value stocks suggests the volatility we saw in March was not totally driven by genuine fears of tariff-related economic collapse.

What we witnessed in March was a retrenchment of tech sector valuations, which had become quite extended and were in a vulnerable position.

Looking at the performance of the NASDAQ and Mag Seven stocks over a longer time frame puts in perspective the degree to which tech names had completely outperformed other areas of the market.

S&P 500, NASDAQ, S&P 500 Value, Mag Seven

Total Return (Last 12 Months)

Despite the sharp sell-off in recent weeks, Mag Seven stocks are still outperforming over the past year.

Meanwhile, the performance of NASDAQ stocks (which are a good proxy for tech and growth) is as of the end of March more or less in line with the S&P 500 (which is more balanced between growth and value) on a one-year basis.

Tariffs have been the catalyst for the negative market momentum in the tech sector, but the stage was set by dramatic tech outperformance that began in earnest in September 2024 and extended all the way to mid-February 2025.

Rotation to international

Just as investors in recent weeks have moved money out of highly valued tech shares into other industries, we also saw strong performance in international stocks.

While the S&P 500 was down 4.3% in the first quarter of 2025, developed market international stocks (as measured by the MSCI EAFE Index) were up 7.0%.

S&P 500, NASDAQ, International Stocks

Total Return (Last 3 Years)

International stocks had badly lagged U.S. stocks for most of the past year, until mid-February, thanks in no small part to the sharp rally in tech shares.

But if we look at relative performance on a three-year basis, the performance gap between the U.S. and international stocks has now largely disappeared.

Put differently, as a result of this recent tech-led sell-off, U.S. stocks have “caught down” to international stocks—at least on a three-year basis.

Inflation concerns

In addition to tariffs, concerns about persistent inflation have also hurt investor sentiment. Last week’s Personal Consumption Expenditures Price Index (PCE) reading, which came in slightly above expectations, contributed to selling pressure.

As we discussed over the weekend on our livestream, while sticky inflation is a strong media narrative, especially as it relates to tariffs, actual bond market inflation expectations tell a different story.

Despite a lot of speculation about tariffs being highly inflationary, market-based inflation expectations, as inferred from Treasury Inflation-Protected Securities, remain low.

Long-term Inflation Expectations

(Last 12 Months)

The 5-Year, 5-Year Forward Inflation Expectation Rate represents the average inflation rate (over the five year period beginning in five years) that is being priced in by investors in U.S. Treasuries.

This forward inflation rate is now approximately 2.1%, quite close to the Federal Reserve’s target level of 2%.

The key takeaway is that the bond market is not signaling any reason to panic on the inflation front.

Mag Seven drove sector performance

Similar to February, the Technology sector led the way down in March, while other industry sectors that have large exposure to technology-related companies also fared poorly.

Consumer Discretionary stocks, for example, suffered because Tesla (TSLA) and Amazon (AMZN) are the two largest names in that sector. TSLA and AMZN shares declined 12% and 10% respectively in March.

Source: FactSet

Similarly, the Communications Services sector has Magnificent Seven constituents Meta (META) and Alphabet (GOOGL) as its two largest holdings. These stocks represent close to 40% of the total market capitalization of the sector.

META and GOOGL shares declined 14% and 9% in March.

More defensive sectors, such as Utilities, Consumer Staples and Health Care, performed relatively well. Their earnings are perceived as less vulnerable to an economic slowdown, while their valuations benefit from declining long-term interest rates.

Liberation Day fall-out

Yesterday evening, President Trump rolled out his reciprocal tariff plans.

There had been some optimism in the market this week that the tariff policy would be gentler than previously feared. However, the proposed levels are generally seen as higher than expected.

As markets come under pressure, we will keep subscribers up to speed on our latest thinking through the usual channels.

Portfolio highlights

The top performing stocks in the portfolio in March were Williams (WMB) and Arch Capital Group (ACGL), which each returned 4%.

The worst performing stocks in the portfolio were Oracle (ORCL), which returned -16%, and Costco (COST), which returned -10%.

Shares of NVIDIA (NVDA) performed poorly over the course of March, down 13%, but were basically flat since we added NVDA to the portfolio in the middle of the month. (The March 12 portfolio update report on NVDA can be accessed here.)

As emphasized above, the last six weeks or so have been an extremely difficult stretch for Mag Seven stocks, including NVDA.

While the Mag Seven are in many ways exceptional companies, we have previously been reluctant to include them in the portfolios because of valuation concerns. In the case of NVDA, the steep decline in recent weeks has led us to revisit that position.

WMB shares performed relatively well in recent weeks with some assistance from firmer energy prices, which benefited the Energy sector generally.

As the leading natural gas infrastructure player in the U.S., WMB continues to be viewed as a significant beneficiary of the Trump policy agenda. WMB benefits from not only a solid demand outlook for its existing network of natural gas pipelines but expansion opportunities as well.

The almost insatiable electrical power requirements of the many large-scale AI data centers under construction throughout the U.S. represent a key demand driver for natural gas.

To the extent tariffs stimulate an expansion of energy-intensive domestic industrial activity, this should only bolster demand for natural gas that is already supported by the AI buildout.

ACGL is a well-managed and highly profitable property and casualty insurer and reinsurer. The share price has been supported by robust cash flow generation and disciplined share repurchases.

Shares of ORCL were down in March, consistent with the performance of other large-cap tech names.

ORCL shares started to gain momentum following a strong outlook provided in the mid-March third quarter earnings report, but they were ultimately brought down with the broader market weakness by the end of the month.

Notably, ORCL reported 60+% growth in its order book. This does not include any contribution from Trump’s Stargate initiative.

Similar to NVDA, ORCL is likely to see robust earnings growth over the next several years (and beyond) on the strength of AI-related spending. With the recent reversal of market sentiment, ORCL now trades with a very attractive valuation (approximately 18x FY 2026 consensus earnings).

Having substantially outperformed the overall stock market over the past two years, COST shares underperformed in March following its second quarter earnings report.

Top line revenue results were well received, but earnings slightly missed, partly as a result of foreign exchange rates (which should become less of an issue with recent dollar weakness).

As we are potentially entering a period of heightened volatility, we encourage subscribers to stay focused on the long-term fundamentals of strong businesses rather than market headlines.

Periods of risk aversion, like the current one, often produce excellent entry points for long-term investors in high quality stocks.

Key metrics

Valuation detail

Performance detail

Company snapshots

Oracle Corporation (ORCL)

S&P Global (SPGI)

Stryker (SYK)

Texas Instruments (TXN)

Arch Capital Group (ACGL)

Air Products & Chemicals (APD)

Costco Wholesale (COST)

Eaton (ETN)

GXO Logistics (GXO)

NVIDIA (NVDA)

Roper Technologies (ROP)

Thermo Fisher Scientific (TMO)

Union Pacific (UNP)

Visa (V)

Vulcan Materials (VMC)

Williams Companies (WMB)

The 76research American Resilience Model Portfolio is designed to provide exposure to businesses that operate with competitive advantages in structurally attractive markets. The objective is to identify businesses that can survive and thrive across different macroeconomic environments and whatever geopolitical crises may unfold. The holdings are intended as long-term investments to drive portfolio compounding with minimal need to realize taxable gains. Emphasis is placed on critical markers of business quality such as barriers to entry, physical scarcity of assets, balance sheet strength, effective capital allocation and durable long-term growth drivers. These assessments are paired with careful consideration of valuation and risk.    

Disclaimer

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