The Quality Opportunity Grows
Following President Trump’s address last night, the Iran war continues. In March, the oil price has been the primary driver of global financial markets, and the varying correlations among companies and assets are falling away as it dominates. Energy prices determine the likely path of inflation and, therefore, interest rates. These are important in price setting for financial markets.
Having fallen from 4.7% to 3.9% since 1 January 2025, the yield on US government 10-year bonds has risen back towards 4.4%. Trump appears sensitive to this, as it limits government borrowing and raises the cost of mortgages.
US 10-Year Bond Yield
We are pleased with two things. Firstly, the ByteTree Quality portfolio has displayed resilience, offering a calmer ride through this storm. This is a key benefit of quality investing, and the lack of actions required is a feature of the strategy. We can be calm during crises. No positions caused us any great anxiety, and conviction remains high because of our companies’ market-leading positions, self-reinforcing growth, leading innovation, product quality, and essential nature of these companies. AI, or even war, can’t disrupt toothpaste, chocolate, or cleaning products. Whether oil prices are high or low, we still need medicines, and pioneering innovation will enable new growth drivers long into the future.
Moreover, part of our discipline is an unwillingness to overpay for quality. We wait until better valuations arrive before getting interested – as they inevitably do. Today, a growing number of great companies that we like are retreating to more reasonable price levels. The section of our investable universe that we would consider buying has therefore grown, giving us a better opportunity set going forward.
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Investment Director: Charlie Morris. Editors or contributors may have an interest in recommendations. Information and opinions expressed do not necessarily reflect the views of other editors/contributors of ByteTree Group Ltd. ByteTree Asset Management (FRN 933150) is an Appointed Representative of Strata Global Ltd (FRN 563834), which is regulated by the Financial Conduct Authority.
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