Insight & Commentaries
The Federal Reserve meets this week to determine the next steps for monetary policy. And while the Federal Open Market Committee appears divided as to the appropriate future course for policy, financial markets are positioned for significant rate cuts ahead. As the chart below shows, the futures market is betting on 5-6 rate cuts by the end of next year, ultimately lowering short-term policy rates to under 3% from today’s rate near 4.5%. The committee meets under intense pressure to act as inflation remains well above target and amid signs of slippage in job growth. Markets Priced for Big Cuts…
Stock prices are more than numbers on a screen. They tell us what market participants believe. These beliefs are distilled into prices that reveal investors’ changing expectations about the future. The expectations are not those of a CEO or a handful of analysts — they are the aggregate judgment of all the actual buyers and sellers of stocks who set prices each day. By applying a basic valuation framework[1] to the five hundred largest U.S. companies, we can tease out what the market assumes about long-run growth in perpetuity. This is not about next quarter or even the next decade….
Markets have proven more resilient than expected in the first half of 2025, rebounding quickly from tariff-driven volatility. While headline earnings remain strong, pressures are building beneath the surface — particularly in inflation, valuations, and global growth dynamics. Foreign developed markets have outpaced the U.S., supported by a weaker dollar and improving international conditions. Meanwhile, we are raising our long-run U.S. productivity forecast to 2.5% from 1.75%, reflecting growing confidence in the transformative impact of AI. Like the internet boom of 1995–2005, we expect AI to drive meaningful productivity gains, boosting long-term equity return potential.
Let’s begin with some simple math. If you invest $100,000 and lose 10% in the first year, you’re down to $90,000. If you then gain 10% in year two, you don’t break even. You end up with $99,000. That’s a net loss of $1,000—despite an average return of zero percent. How is this possible? It’s because averages lie. What matters in the real world is not average return but compound return. The number that shows up on your statement at the end. Now consider a more extreme case. You lose 50% in year one, then gain 50% in year two….
President Trump’s April 2 tariff announcement marks a pivotal moment in global economic policy, reflecting a broader shift from globalization toward protectionism and nationalism. While globalization delivered real benefits—lower inflation, expanded trade, and economic growth—its effects have become more contested. Events such as 9/11, the financial crisis, and the COVID-19 pandemic exposed vulnerabilities, contributing to rising skepticism about global integration. A growing number of voters and policymakers, across party lines, now question whether globalization serves their long-term interests. The result is a changing policy landscape marked by tariff actions, tax debates, and strategic repositioning. In this uncertain environment, we believe…
Over the years, the investing thesis of Washington Crossing Advisors has endured; namely, buying quality companies at reasonable valuations. Through market peaks and troughs, unpredictable inflation and interest rate swings, and periods of volatile growth, WCA remains committed to owning predictable businesses with low debt and profitable assets. In doing so, we construct our equity portfolios with a keen focus on volatility, aiming to achieve a strong risk-adjusted return over time. The following commentaries dive deeper into our quality thematic while addressing commonly misunderstood investing conceptsthat could present hidden dangers in portfolios.
President Trump’s April 2nd announcement of a new “reciprocal” tariff policy comes on the heels of a volatile quarter—bonds outpaced stocks, growth stocks lost their edge, and haven assets gained favor. These new tariffs mark a pivotal shift in the trade, growth, and inflation outlook for the United States and the global economy. A growing consensus now assumes slower trade, economic growth, and a temporary rise in inflation pressures. From Globalization to Nationalism This shift should not be surprising. The once-dominant rallying cry for “globalization and free trade” is being replaced by calls for “protection and nationalism.” A widening gap…
Recently, market volatility has surged as economic uncertainty grips financial markets. Growth expectations have collapsed, stock market volatility is spiking, and credit spreads are widening. This environment has placed renewed focus on how different stocks respond to macroeconomic pressures — and, crucially, why quality matters more than ever. Traditionally, market downturns and economic stress trigger debates over whether value stocks or growth stocks will fare better. However, an underappreciated factor in this discussion is quality. High-quality stocks — characterized by low leverage, profitable assets, and consistent results — have historically outperformed their lower-quality counterparts in periods of macroeconomic stress. For…
Investing is about understanding risk. If you don’t understand risk, you don’t understand investing. And yet, for decades, the industry has relied on flawed tools — outdated beta models and rigid sector classifications — to measure it. Some managers, particularly those obsessed with tracking benchmarks, force their portfolios into pre-defined sector categories designed decades ago, long before modern data and real-world market behavior could be fully understood. They do this because they are fearful of performing too differently from pre-defined, legacy benchmarks that were never constructed with investors’ interest or risk in mind. These legacy benchmarks and sector classifications, assigned…
At Washington Crossing Advisors, we adhere strictly to a “quality at a reasonable price” philosophy. We do not pursue “growth at a reasonable price,” nor do we chase “yield at a reasonable price.” Our foremost principle is quality, as we firmly believe that quality endures better than growth over time. In our view, companies with less debt, more profitable assets, and consistent business performance exemplify high quality. To systematically assess quality, we employ a rigorous quantitative process, grading the 1,000 largest U.S. stocks from “A” (highest quality) to “F” (lowest quality). These two groups —”A” Quality (up 12% in the…
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