Merry Xmas

This is a short note to wish you all a merry Christmas and we hope you take time to enjoy the holidays.  

2025 was, like many, an interesting year, with the start of the Trump Presidency. Most of the action happened in March and April as Trump introduced tariffs and markets became extremely volatile but as it often the case, recovered with increasing momentum.

Along with US equities, emerging markets, gold and other precious metals stole most of the headlines and the returns. 

We are pleased with our results across the 3 Wells even though we have been holding plenty of cash. Cash of course reduces your overall returns, but as we teach (some say, preach), we understand the maths of losses and so we studiously avoid investing when we believe there is a heightened risk of future losses. 

We seek to avoid future losses, but at the same time protect past profits. Every time the market falls heavily from high valuations your long term geometric returns fall as well and it takes a long time to recover. Buying the dip works until it doesn’t and from our experience and history it doesn’t when the market is excessively overvalued. We just cant tell you which dip not to buy. 

As you know we tend to be rather contrarian and swim against the crowd. Not because we like it but because we think we have the facts on our side. We are bullish energy and commodities and we will be focusing on these asset classes over the coming years because the valuations are a lot more attractive than other sectors which remain well overvalued. We can not time the market and we don’t aim to. We simply want to avoid large losses and remain concerned that after a 16 year secular US bull market where the CAPE has climbed from a below average 12 to an almighty 40, we have legitimate reasons for being cautious. But that doesn’t mean we expect our own portfolios to suffer heavy losses. 

Beating the market over the long term requires having a systematic approach that adapts to all stages of the market cycle. That is why we introduced some technical analysis into our portfolio and more recently talked about hedging. It is illogical to us that we should only want the market to go up, when we know thanks to history that it also goes down. And at these valuations, we expect it to go down a lot. These market cycles are as old as Adam and Eve, and so we think it makes sense to have a strategy that allows you to either avoid larger losses by adjusting our asset allocations dynamically, or even setting aside a small portion of our funds to hedge or go short the market. 

After all, there is plenty of evidence that sensible hedging can lead to higher returns over the long term. Most of us have insurance like life, car or property where large losses have large impacts. we think loss mitigation will be the theme for 2026 and we will aim to demonstrate how it can be beneficial to your long term returns. 

Finally, we want to extend our thanks to all of you who took time to comment or listen to our podcast, read a blog or newsletter and we hope that you have taken away something that helps you improve as an investor. 

As we look ahead to 2026, our focus remains unchanged. We will continue to prioritise risk first, valuation discipline, and evidence over narratives. This means staying patient when opportunities are scarce, being decisive when probabilities improve, and remaining humble about what we cannot control.

You can expect us to continue refining our frameworks across the three Wells, spending more time explaining how we think rather than what we buy, and being transparent about both periods of action and periods of restraint. Markets do not reward constant activity. They reward preparation, discipline, and the ability to act when conditions are favourable.

We also encourage you to use this time to reflect on your own behaviour as an investor. The biggest determinant of long term success is rarely intelligence or access to information, but temperament. Understanding your response to volatility, drawdowns, and uncertainty is just as important as understanding balance sheets or macro data.

We appreciate the trust you place in us and do not take it lightly. We look forward to continuing the journey with you in the year ahead and helping you navigate markets with clarity, patience, and conviction.