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MARKET INSIGHT

The Bubble Has Burst. Now What?

At the outset of the year, we argued in The Picton Report that U.S. equities were a large and dangerous bubble. As with most bubbles, though, it’s only with hindsight that we can point to the catalyst that ended the party for good. Turns out, disastrous U.S. trade policy did the trick this time around.

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Investment Themes

01/

Navigating the Tariff environment

The unpredictable narrative around shifting tariffs and implications for a global trade war have brought unprecedented volatility to markets. Tariffs are likely to lead to lower economic growth and higher inflation, which could cause a stagflationary environment. This environment requires more focus on disciplined risk management and strict risk controls.

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The U.S. is on recession watch

While the impact of tariffs and slower growth have not yet been seen in the economic data, market sentiment is deteriorating. Markets have rapidly began pricing in a higher probability of a recession. The increasing odds of a recession are pushing investors into a risk-off sentiment while looking for opportunities to take more defensive positions.

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Challenges for traditional safe havens

Historically a sell-off in equity markets would push investors into safe havens like U.S. Treasuries. The current rate environment remains very fragile as yields on the 10-year and 30-year U.S Treasuries continue to climb and put pressure on the U.S. Dollar. The risk of higher inflation and higher unemployment makes the outlook for rate cuts uncertain.

Q1 Asset Class Commentaries

Equity View

Equity View

Managing Risk and Opportunity in Volatile Markets

Heightened volatility requires tighter risk controls to help reduce downside exposure, while also looking to capitalize on opportunities presented by market sell-offs and dislocations.

Fixed Income View

Fixed Income View

Are Credit Markets Too Complacent?

The disconnection between equity markets and bond yields makes for a challenging fixed income environment, but a defensive stance and active duration management can help uncover opportunities amid uncertainty.

Multi-Strat View

Multi-Strat View

Staying Focused on Diversification and Alpha

As traditional assets face continued pressure, uncorrelated alternative strategies could offer enhanced diversification and the potential to generate alpha in uncertain markets.

Arbitrage View

Arbitrage View

A Stabilizing Presence Amidst Volatility

While the uncertainty around Tariff policies continues to impact markets and delay deal activity, Arbitrage Strategies continue to prove their resilience during periods of heightened market risk.

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All figures provided are sourced from Bloomberg L.P. unless otherwise specified, and are based on data as at the dates indicated.

This material has been published by Picton Mahoney Asset Management (PMAM) as at April 22, 2025. It is provided as a general source of information, is subject to change without notification and should not be construed as investment advice. This material should not be relied upon for any investment decision and is not a recommendation, solicitation or offering of any security in any jurisdiction. The information contained in this material has been obtained from sources believed reliable; however, the accuracy and/or completeness of the information is not guaranteed by PMAM, nor does PMAM assume any responsibility or liability whatsoever. All investments involve risk and may lose value. This information is not intended to provide financial, investment, tax, legal or accounting advice specific to any person, and should not be relied upon in that regard. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional.

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