Equity risks and alts opportunities

Market Performance & Valuation

• U.S. stocks have recovered to pre-"Liberation Day" (April 2) levels following a steep decline driven by recession fears.
• The S&P 500 currently trades at 21 times forward earnings, a historically high multiple.
• Market pricing suggests a near 50-50 probability of recession, which David Koston notes is inconsistent with such elevated valuations without an optimistic bias.

Earnings Data & Economic Outlook

• First-quarter earnings grew approximately 12% year-over-year, significantly beating the expected 6% growth.
• The 6 percentage point positive surprise is the largest beat in the last 12 quarters, contrasting with the typical 4 percentage point average.
• Goldman Sachs' baseline forecast anticipates economic growth without a recession for the remainder of 2025, supporting a higher market trajectory.
• First-quarter results are considered backward-looking (ending March 31) and do not yet reflect the impact of tariffs announced April 2.
• Second-quarter earnings, due mid-to-late July, are expected to reveal clearer impacts on revenue demand and margin compression from input costs.

Tariff Policy & Risk Scenarios

• Investors have priced in an "off-ramp" scenario following the April 9 announcement delaying tariff implementation by approximately 90 days.
• Downside risk analysis suggests that in a recessionary scenario, earnings could fall by approximately 10%, potentially pushing the S&P 500 to 4,600.
• Management debates regarding tariff incidence (pass-through to consumers vs. absorption by companies) remain unresolved and vary by industry.
• The market currently reflects the expectation that actual tariffs will be significantly lower than those originally proposed on April 2.

Global Investment Flows & Regional Sentiment

• RIAs at the Professional Investor Forum manage $1.3 trillion in client capital; sentiment is characterized as uncertain but highly engaged rather than fearful.
• European investors are increasingly repatriating capital to domestic markets, driven by currency headwinds and local opportunities.
• Asian investors continue to view U.S. exceptionalism and brand recognition as strong, with no significant shift away from U.S. equities observed.
• U.S. markets trade at 20x earnings versus ~14x for the rest of the world, though PEG ratios are comparable when adjusting U.S. growth and ROE premiums.
• Capital flows indicate a marginal shift toward international opportunities, though the U.S. remains 65-70% of global equity benchmarks.

Portfolio Strategy & Client Focus

• Private market allocations are rising, with growing demand from individual investors for institutional-grade access to private equity and credit.
• Advisors are actively addressing "concentrated stock risk," noting that 46% of Russell 3000 stocks since 1992 experienced drawdowns exceeding 75%, and 80% never recovered.
• The median performance of 9,227 Russell 3000 stocks since 1992 is just 2%, compared to a ~10% return for holding the broad index.
• Goldman Sachs Asset Management advocates for broader return structures, such as equal-weighted indices, to improve risk-adjusted returns relative to cap-weighted concentration.