In 2025, the Grey Owl All-Season (GOAS) Strategy delivered a solid 11.4% return, successfully navigating fluctuating market conditions and achieving its core objectives of minimizing drawdowns, surpassing short-term bond returns, and actively participating in market rallies. The year began with significant volatility, seeing the "Magnificent 7" stocks drop by approximately 30% from their peak. In contrast, the GOAS portfolio experienced a minimal decline of under 3% at its lowest point in early April. The rapid market recovery that followed led to a strong performance across most risk assets, demonstrating the effectiveness of GOAS's risk management and adaptive repositioning as market sentiment shifted towards growth.
The macroeconomic landscape at the beginning of 2026 indicates a developing shift in market leadership. While 2025 saw technology and growth stocks outperform the broader market, small-capitalization stocks are now showing significant outperformance, rising by 7.6% year-to-date, alongside commodities, which are up 7.4%. This trend is supported by an accelerating U.S. economic growth, which is projected to gain momentum through the second quarter of 2026, and continued disinflation, as evidenced by decelerating inflation expectations. These conditions create a favorable environment for risk assets, particularly cyclical equities and commodities. Grey Owl's portfolio is strategically aligned with these prevailing conditions, exhibiting a strong 5.3% return through late January 2026.
The broadening of the U.S. equity market beyond mega-cap technology stocks is a key factor in this shift, with smaller and more cyclical companies showing improved revenue growth and margins compared to the previous year. Market internals further support this trend, indicating strengthening buying power and receding selling pressure. This suggests a more robust and widespread market advance, moving beyond the narrow participation seen in earlier periods. The GOAS portfolio reflects this outlook by increasing exposure to U.S. small-capitalization equities, global equities (especially in emerging markets), and precious metals and commodities, while reducing fixed income and cash allocations. This strategic positioning aims to capitalize on current growth opportunities while maintaining protection against potential inflation or market stress.
Embracing a proactive and adaptable investment philosophy, the Grey Owl All-Season Strategy is designed to thrive in diverse market conditions. By constantly re-evaluating economic indicators and market dynamics, the strategy ensures alignment with prevailing trends, fostering resilient and diversified growth. This approach empowers investors to achieve their financial goals with confidence and optimism.