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May 6, 2025 - Here are five key takeaways from our first-quarter market update:

1. CAPITAL MARKETS: HighGround's Capstone Fund posted positive returns for the quarter and exceeded its benchmark across all time periods.
• Global markets diverged in the first quarter as investors weighed the potential impact of the U.S. Administration’s trade and tariff policies on future global growth and inflation.
• The U.S. dollar weakened over the quarter, declining approximately 4.0% (as measured by the ICE U.S. Dollar Index), amid a sharp drop in U.S. Treasury yields and a weakening economic growth outlook. Interest rate differentials with European bonds fell as German yields surged due to the introduction of a large fiscal spending program expected to increase borrowing and growth in the region.
  
  
2. U.S. ECONOMIC GROWTH: The U.S. economy remained resilient in the first quarter despite ongoing fiscal and trade policy uncertainty. However, mixed economic signals emerged as U.S. inflation expectations rose and consumer sentiment declined sharply. Retail sales increased in March, driven by accelerated purchases of goods and automobiles ahead of anticipated tariffs. Meanwhile, U.S. manufacturing continued to contract, hindered by weaker demand and tariff-related concerns. In contrast, the services sector maintained its growth trajectory, though at a slower pace than in previous quarters.
   
   
3. U.S. INFLATION: Inflation eased during the quarter, with headline U.S. inflation, as measured by the Consumer Price Index (CPI), closing at 2.4% year-over-year, driven by a decline in energy prices in March. Core CPI (excluding food and energy) ended the quarter at 2.8%, marking the smallest 12-month increase since March 2021. Shelter costs, the largest driver of inflation, increased 4.0% in the past year, the smallest rise since November 2021.
   
   
4. U.S. LABOR MARKET: The U.S. labor market, although still healthy, exhibited indications of weakening as the unemployment rate increased to 4.2% at the end of the quarter.
   
   
5. GLOBAL ECONOMIC GROWTH: Global economic activity was mixed, with growth driven by the services sector, while manufacturing output slowed, particularly in consumer and goods industries in Europe and Japan. The International Monetary Fund (IMF) lowered its 2025 global growth forecast to 2.8% from 3.3%, citing the sharp rise in tariffs since the beginning of the year. The IMF now projects U.S. growth to slow to 1.8% in 2025, down from 2.7% earlier this year.

If you have any investment questions, call our expert team today at 214.978.3300 or email info@highgroundadvisors.org.