Stilling Leads to Seeing

April 29, 2025

Spring in New England is beautiful. Rebirth, life, color. It's a miracle every morning watching the flowers grow and listening to the bird’s chirping. I am grateful for the gift of being able to watch this spectacle unfold in a country and town with security, wealth, and peace. Without peace and security, it's hard to experience these gifts and moments fully.

If you feel like Spring is passing by without you fully appreciating the wonder of it all, or you’re angry at news, or some other perceived injustice, I urge you to do something about it!

Perhaps let go of the emotion of anger, and practice being more charitable. I don’t mean supporting this or that personal cause which matters to you. I mean be charitable in the definition of the Cambridge Dictionary: “The quality of being kind to people and not judging them in a severe way.”

My recommendation is to show kindness to your neighbors, your enemies, and those who think differently than you. Even if you feel other people are angry and twisted, show kindness. That is charity. So, while giving dollars is wonderful, showing kindness to others is what really changes the world.

Emotion and Fear generates the Fight or Flight Response

If you notice yourself being triggered by something in the news which causes a strong emotional reaction, there is a playbook which can help. Ask yourself, are you in imminent danger? If not, pause, take some deep breaths and perhaps remove the stimulus that is causing your reaction.

I realize that this is not always easy, but the benefits of doing so are immense.

I have experienced (arguably) some of humanity’s most challenging emotional suffering. In this state, all thinking was clouded, and I was not well equipped to make decisions on my own. Fortunately, I also knew I wasn’t in imminent danger. I relied on the help and guidance of advisors and friends. These people had the following attributes:

1. They operated in my best interest without thinking of themselves.

2. Trust that I could be completely vulnerable with them.

3. Knowledgeable in help solving my issues.

4. Helped me see many options and helped develop a plan.

Wealth advisors should bring these attributes and actions to the families they serve.

Emotions seem to be running high this year

If any of the below applies to you find a friend or advisor that can help you through these times:

• Consuming more news to feed your desire for control.

• Believing that change to the status quo can only be negative.

• Making financial or life decisions based on how you feel in the short term.

• Allowing someone else’s actions to determine your mood.

An advisor or friend with wisdom, experience, and a giving nature can always help. I’m so thankful for the many wise friendships and advisors I have in my own life.

The noise is deafening; be intentional

In many ways, this year in financial market feels to me like the Covid period. For professional investors, that means a lot of work. As a hedge fund manager friend in London said to me recently: “I love the intellectual challenge of figuring this puzzle out, but it’s going to put me in an early grave!”. I feel the same. I love the intellectual challenge but siphoning through all the noise to get to what’s actually happening takes an enormous amount of time and effort.

I must use my energy on consuming media to decipher the facts, but it takes from other, more important areas of my life. If you don’t have to consume this media, I (again) suggest reducing the amount of time spent on these papers that are fighting for your attention.

I realize people may feel better being “informed” or feeling “in control”, but it’s probably not providing much benefit. There are too many short term “news stories” which often become irrelevant in the near future; basically, it’s more distraction and noise in most people’s lives.

I recently had some very smart friends argue about the benefits of reading the NY Times every day. I was baffled. How can adding more opinions, noise, and hysteria to your day aid you? I would argue that there is far more benefit in reading philosophical ideas, old books, and developing inner virtue. There really is nothing new under the sun.

Life is always changing, even if you don’t notice it:

I will reiterate the same things I always say about prognosticating on the future direction of financial markets:

What I don’t know is far greater than what I do know, and the same holds true for everyone else. One of my strengths is that I recognize and accept this fact.

The Past:

• Although I had no foresight or information that we would experience so much chaos in markets in the first 4 months of 2025, what I did point out in previous writings and make adjustment for was:

  • The concentration risk of the top 10 stocks in the S+P500 was historically significant and uncertainty was higher for the index.

  • The dollar seemed expensive relative to other currencies globally, which made international companies cheaper on a relative basis to the USA.

  • Periods of uncertainty always happen in the future; we just don’t know when, what and how. It’s important to have a plan.

  • US Treasuries seemed more attractive relative to other fixed income products.

  • The new U.S. Administration added a much higher degree of uncertainty at the beginning of 2025.

  • We don’t wait for markets to price uncertainty prior to acting. We reflect the changing probabilities and opportunities we see.

  • The risk, illiquidity, and expense of private equity investments were too high relative to the potential rewards. A higher rate environment, heightened uncertainty, and better priced opportunities in the public markets (for lower fees) all work against this asset class right now.

  • In many portfolios we reduced equity risk at the beginning of the year, we increased our allocation to international markets, and we increased cash and short-term treasury bonds.

The Present:

• There are a lot of changes caused by the administration regarding budget cuts, the global trading system, regulation, health, immigration, and other areas.

• People and organizations that are having their business impacted, budgets cut, and losing jobs, will obviously react negatively to changes in the status quo. Information obtained from these sources cannot be relied upon because they cannot be unbiased.

• S+P500 has underperformed this year compared to many international markets. Many investors seem to have reduced risk in US Dollar holdings, and in their concentration risk of the S+P 500 index.

• US Treasury bond volatility has increased, and this has led to media concerns about the USA ability to fund itself.

• The credibility of the USA and the dollar as a reserve currency are being questioned in the media recently.

• Many market participants are expecting negative outcomes for the economy and the stock market. A couple of anecdotal barometers of this are below:

My thoughts, probabilities, and playbook for moving forward:

• If the USA is expected to have difficulty funding itself, why is the US Treasury 10 year note lower in yield that it was 1 year ago?

  • My assessment: The market’s perception is overly pessimistic.

• It is extremely difficult to predict future recessions. Given the over 50% expectation for recession in the USA, if market participants have adjusted their risk accordingly, they may be making a mistake.

  • My assessment: We should probably be looking to add quality companies that are priced for an expected recession which may or may not materialize. This is where we are looking for opportunities.

• Investors may be holding larger amounts of cash, treasury bills and money markets than usual because they expect negative outcomes.

  • My assessment: Cash works when the stock market and other asset markets are falling in price because investments become cheaper. However, the opposite also holds. If you are an investor that needs to grow with asset price appreciation and inflation, if stocks, bonds, and real estate prices go up when you’re holding excess cash, you become poorer in relative terms. You may not notice it because your account balance looks unchanged, but you are poorer.

• Develop plans to help preserve wealth and future purchasing power by buying assets that are likely to accomplish this in the long term.

  • My assessment: Invest in countries that protect property rights, encourage innovation, provide security, freedom of expression, and are poised to develop into the future. Consider countries that are willing to re-think the status quo, and that question the typical way of doing business as usual when it’s not working.

• International investors seem to have recognized that perhaps they carried too much risk in the USA, and the dollar could continue to decline.

  • My assessment: I do suspect that international investors could continue to reduce their allocation to the USA, and this can potentially lead to a weaker dollar over the next year.

  • In my opinion, this does not mean the dollar will lose its reserve status, nor will this materially alter significantly the USA’s standing in the world in the coming decade.

• There appears to be more focus on the negative implications to the USA from the Trump administrations changes.

  • My assessment: Yes, there is clear disruption and change going on, and we must account for that by assuming that volatility will be higher than it’s been over the past few years. There will be some negative short-term impacts, and portfolios should reflect that.

  • However, the potential positives for the USA and markets must also be considered. Such as:

    • New solutions rising from the ashes of disruptive change.

    • More liberal democratic countries will be price competitive in the USA supply chains.

    • Domestic manufacturing in advanced robotics, biotechnology, quantum computing, and artificial intelligence are likely to grow.

    • Technological improvements will benefit many parts of the economy and may increase profit margins.

    • Iranian government and their proxies are increasingly being weakened. This could be positive for development and progress in the middle east.

    • The Ukraine war is more likely to come to an end and Russia has been severely weakened over the past few years.

    • Europe is taking more accountability for its own security and progress. This could benefit Europe and the rest of the world.

    • Reducing the USA budget deficit is a significant focus, and it may finally start to improve.

    • The security of liberal democracies may improve as countries may be forced to choose to work within an alliance of countries aligned with the values of the United States.

Summing it up

• I have no idea what the short term will bring, nor what the market will do in the next 12 months. However, as usual, we have a game plan to deal with the uncertainty, probabilities, and opportunities.

• Change often causes fear, but systems and outcomes can end up better over time.

• Some investors will make decisions based on emotion, and this often leads to mistakes. Hopefully, I will be able to exploit these poor short-term decisions to our advantage in pursuing our long-term objectives.

• Systems with robust legal systems that encourage people to question the status quo, change, criticize, and innovate are at a significant advantage when it comes to future developments. In my estimation, these countries provide better long-term investment opportunities.

  • The United States is a good example of this because, as the Federalist Papers point out:

    • A large, diverse republic is better suited to controlling the negative effects of factions (special interest).

    • Allowing the 3 divided branches of government to fight for power prevents tyranny and protects liberty.

    • This system allows for artistic expression without limits, innovation, and dynamism.

    • This system is more able to adapt if world relationships and interactions in the world trading system change suddenly.

    • Ideas can flourish among the masses.

  • China is a poor example of this as the leader of the Chinese Communist Party cannot be questioned without significant risk of penalty.

    • This type of system can be directed, targeted to accomplish what is deemed important to the CCP. All energy can get behind initiatives without debate, and it can be very forceful. This system has benefited China greatly in the last few decades.

    • This system will struggle to adapt if the relationships and interactions in the world trading system change suddenly.

    • This system is prone to mistakes as one person never has all the answers. There is no upside in questioning mistakes even if they are known. There is limited upside in artistic expression without limits because it could have significant penalties. This ultimately limits the ability to innovate and change.

    • Ideas cannot flourish unless they are sanctioned from the top.

At August Wealth, we will continue to weigh the probabilities and opportunities that will assist us in hopefully helping you and your family pursue growth in your wealth, subject to your objectives and risk tolerance.

i

i Investment advice offered through Stratos Wealth Advisors, LLC, a registered investment advisor. Stratos Wealth Advisors, LLC and August Wealth Advisors are separate entities.

Trading instructions sent via email, fax or voicemail will not be honored. There is no assurance that these messages can be retrieved on a timely basis, nor is there any sure method of confirming the customers identity.

he information contained in this email message is being transmitted to and is intended for the use of only the individual(s) to whom it is April 28, 2025 addressed. If the reader of this message is not the intended recipient, you are hereby advised that any dissemination, distribution or copying of this message is strictly prohibited. If you have received this message in error, please immediately delete.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful. No reader should make any investment decision without first consulting his or her own financial advisor and conducting his or her own research and due diligence.

The opinions and information contained herein have been obtained or derived from sources believed to be reliable, but August Wealth Advisors makes no representation about their timeliness, accuracy or completeness. Content in this material is for general information only and not intended to provide specific investment advice or recommendations for any individual. Investing involves risk including possible loss of principal.