We hope your New Year is off to a great start! January was a bumpy but ultimately positive month for financial markets, with major indices closing higher despite some notable disruptions.
One of the biggest surprises came in the month’s final days when the White House announced new tariffs on Canada, Mexico, and China. This reignited concerns about inflation and whether the Federal Reserve might delay further interest rate cuts. As we’ve noted before, markets tend to be more volatile in the months following a presidential election, and we continue to monitor risks. However, long-term investors should remain focused on owning high-quality businesses with strong fundamentals, as those are the companies that tend to perform well over time.
So far, corporate earnings have remained resilient, with over 75% of S&P 500 companies beating expectations this quarter. Economic growth projections also continue to improve, which should help moderate valuations over time.
European markets had an exceptional start to the year, with the region’s stock index rising more in January than in all of last year. London’s FTSE and Germany’s DAX reached record highs, fueled by strong corporate earnings. One of our portfolio holdings, Novartis, reported solid results and expects regulatory approval for 15 new medicines this year, including a promising prostate cancer treatment.
Meanwhile, Nvidia, the must-have stock of the artificial intelligence boom, dropped 11% in January after Chinese upstart DeepSeek claimed to have trained an AI model far more efficiently than its competitors. Unlike previous pullbacks driven by valuation concerns, this decline was about competition—a fundamental risk even for world-class businesses.
As we’ve discussed before, when a company enjoys massive profit margins and market dominance, it naturally attracts competitors looking to capture market share. While Nvidia remains a leader in AI hardware, this is a reminder that no company is immune to disruption. New entrants often bring innovations, pricing pressure, or regulatory scrutiny that can erode a leader’s edge over time—something investors should always consider when evaluating even the strongest businesses.
While Nvidia’s decline pulled down the S&P 500, this kind of market rotation is a healthy development. It signals that investors are broadening their focus beyond a handful of dominant tech names, allowing overlooked but fundamentally strong companies to gain traction. When capital shifts from heavily concentrated sectors, it creates opportunities for well-run businesses in other industries—many of which have been undervalued or ignored—to attract investor interest and see their stock prices better reflect their true potential.
Over time, this diversification strengthens the market’s foundation, reducing excessive reliance on just a few companies and fostering a more balanced and sustainable investment environment.
In late December, we added Dexcom (DXCM) to the portfolio, recognizing its strong growth potential in the rapidly expanding diabetes management market. Dexcom is a leader in continuous glucose monitoring (CGM) technology, providing innovative solutions that help individuals manage diabetes more effectively.
The company has consistently achieved strong revenue growth, driven by increasing adoption of CGM devices and ongoing advancements in its product offerings. With a robust pipeline of next-generation technology and expanding global reach, Dexcom is well-positioned to benefit from the long-term trends in healthcare innovation and chronic disease management. We believe its combination of market leadership, recurring revenue, and strong financial performance makes it a compelling addition to the portfolio.
Despite ongoing market fluctuations, we remain confident in our long-term investment approach and the strength of the businesses in our portfolio. If you have any questions or want to discuss portfolio adjustments, please don’t hesitate to reach out.
As always, we appreciate your trust and look forward to a successful year ahead.
