Waiting for Godot, Again!
We remain constructive on the financial markets—though with important caveats. Our investment approach has always leaned toward equities since they deliver significantly higher long-term returns than bonds. That said, bonds and Treasury bills still play an important role in portfolios: they reduce volatility and, for clients drawing income, provide a stable pool of funds. To that end, we typically set aside three years of planned withdrawals in Treasury bills so clients can feel confident that their near-term needs are covered.
At present, we’re running portfolios at roughly 60–70% equities and 30–40% Treasury bills. This mix balances growth with safety, while keeping “dry powder” available if market declines create opportunity. We’ve believed for some time that tariffs and trade policy would eventually put upward pressure on inflation, while slowing economic growth. Wage demands and supply chain costs could still prove stickier than many expect, though so far inflation has held steady rather than accelerating.
It sometimes feels like Waiting for Godot: we keep expecting inflation to pick up more noticeably, yet it hasn’t materialized. Our base view remains “higher for longer.” The Fed has started trimming short-term rates and may cut another 25 basis points by year end—but we expect no more than 50 bps in total. The bigger question is what happens to longer-term interest rates.
Where We Stand Now
Employment remains steady—companies aren’t hiring aggressively, but they aren’t cutting either. Wages are rising modestly, particularly among higher earners, supporting consumer spending.
Economic growth was strong in the first half as consumers accelerated purchases ahead of tariffs. We expect a slower second half as higher prices absorb more of the consumer’s spending power. The third quarter may hold up reasonably well depending on how businesses absorb costs.
We’ll be paying close attention to corporate profit margins as Q3 earnings are reported.
Looking Ahead
We see several reasons to remain optimistic about the medium term:
The “One, Big, Beautiful Bill” (now “Law”) is expected to provide modest stimulus.
Technology and utility companies are investing heavily in capital spending.
Trade agreements are attracting new foreign investment to the U.S.
Higher OPEC output could lower fuel costs while reducing Russia’s revenue for its war machine.
Most importantly, Artificial Intelligence is rapidly improving productivity. AI’s ability to process vast data and make inferences has the potential to add 0.5–1% annually to U.S. GDP growth for the next decade—perhaps the foundation of a new bull market.
Risks to Monitor
In addition to capital spending on infrastructure in the US, reconstruction spending in Palestine ($50+ billion) and potentially Ukraine (over $500 billion) could push commodity prices higher.
U.S. support for Ukraine has been inconsistent, though European backing may give Ukraine staying power.
Relations with China appear to be stabilizing, with both sides recognizing mutual dependence, though tariffs remain a live issue.
Inflation & Rates
Inflation remains around 3%—above the Fed’s 2% target, but close to the long-term U.S. average. While the Fed still projects 2% by 2027, we think 3% is more realistic. Rates have already been cut by 25 bps, and another small cut is possible.
Our Positioning
Technology, now over 32% of the S&P 500, continues to drive earnings. We’ve been selectively adding exposure and will look for further opportunities.
We maintain Treasury bill holdings for stability and liquidity.
Staying true to our contrarian philosophy, we’re also looking for undervalued companies “nobody loves”—often less exciting than tech, but typically less volatile.
We remain cautiously optimistic: constructive on equities over the long term, while maintaining balance and flexibility for whatever the next phase of the cycle brings.
Legal Information and Disclosures
This memorandum expresses the views of the author as of the date indicated and such views are subject to change without notice. Virginia Global Asset Management, LLC (“Virginia Global”) has no duty or obligation to update the information contained herein. Further, Virginia Global makes no representation, and it should not be assumed, that past investment performance is an indication of future results. Moreover, wherever there is the potential for profit there is also the possibility of loss.
This memorandum is being made available for educational purposes only and should not be used for any other purpose. The information contained herein does not constitute and should not be construed as an offering of advisory services or an offer to sell or solicitation to buy any securities or related financial instruments in any jurisdiction. Certain information contained herein concerning economic trends and performance is based on or derived from information provided by independent third-party sources. Virginia Global believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based.
This memorandum, including the information contained herein, may not be copied, reproduced, republished, or posted in whole or in part, in any form without the prior written consent of Virginia Global.
© 2025 Virginia Global Asset Management, LLC