Freedom Calls: 3/11/25, "Trump's deal with Xi and the uncertain outlook for US holiday season spending"  

From the team at Freedom Asset Management

Trump's deal with Xi

Pictured: Trump and Xi agree to postpone tariffs for a year (picture credit: WSJ).

The most important economic news last week was the agreement from the US and China to de-escalate the trade war between the two countries.  Without re-litigating the case for some kind of change in the terms of trade between the US and the rest of the world, there is no doubt that the way that Trump went about it was like a bull in a china job, which had the immediate effect of shocking exporters, importers, consumers and markets.

So what we saw last week reassured all of the above, at least for the next year.

The US benefits from selling more farm produce to China and the ability to buy the "rare earths" that China was restricting.  In return, the US has paused export controls on technology goods including semi conductors and reduced some of the tariffs hikes it put in place this year.

Sometimes it is interesting to see what is not included in the deal: there is no mention of China being restricted from trading with Russia in terms of oil or other goods.  That will come as a relief to both Mr Putin and Mr Xi.   Also Trump does get to keep some of his tariff revenues in place.

You have to take your hat off to Mr Trump - he certainly knows how to put out the fires he starts - of course we would all prefer a world without unnecessary fires, but he has changed the US terms of trade in 10 months, something that might otherwise have taken 10 years of diplomacy, and most likely given political cycles never happened at all.

We never believed Trump was serious about wrecking the global economy, so we kept our nerve in April when stock markets plunged, we stayed invested when many others were calling for the life boats.  The investment returns speak for themselves.    

AI still grabbing the headlines

Big tech came out, largely, with a good set of earnings underpinning the case for both (1) current valuations, and (2) the direction of travel on AI.  We are pleased to see that our US tech fund had another good week.

The naysayers on AI will have been disappointed with Morgan Stanley's report issued last week, which noted: (1) AI expenditure represents a long term profit cycle, rather than a speculative bubble, and (2) $3tr will be spent on data centres between now and 2028, of which $1.4tr will come from the cash flow of the hyperscalers (Google, Meta, Microsoft etc).

I think the important point to remember here is that AI is really "the new Internet".  It will change everything.  If we cast our mind back to the mid-90's when the Internet was being discovered, all sorts of wild business plans were floated that subsequently failed in the dot com boom.  Some of the companies that survived went through painful periods of repricing before breaking out again to flourish into trillion dollar market cap companies.

This time will be no different.  There will be lots of "shiny things" that fail.  Our job as investment managers on our US tech fund especially is to spot the winners and ride their success - and not be distracted by the constant doom of the naysayers.

One of the by-products of the Internet was that it created a long period of price deflation in certain industries, many of which persist today. I can remember as a student buying an airline ticket from London to Madrid which cost me $200 in 1994 (quite a luxury).  That same ticket today can still be bought for around $200 - some 30 years later.  I don't see anyone complaining about this today - and there are more pilots flying in the world today than there were 30 years ago, just a few less travel agents and a lot less paper tickets.  

AI will also do the same for us - just different industries.  In this context it is very helpful to have investment teams in the firm that lived through that internet boom, bust and rebirth.  I always say this is one of the few industries where we get better as we get older!

Performance - steady as she goes, but sterling stumbles

The real loser this week was cable, as sterling took a tumble; you will see all the sterling returns below have taken a notch up, even if the USD returns are flat-ish.  At the risk of sounding like a broken record, as we head into the UK autumn budget later this month, I am not sure why anyone would think sterling is a great idea right now.

We have received the 2Q returns for Astro, our feeder into Mubadala Capital's highly diversified private markets portfolio.  We are expecting to see a good second half here as well.

(For detail, please refer to disclaimer section below)

Our articles this week:

Justin Oliver, Adviser to Opus Global Growth (OGG), writes, "Expect a quieter shopping season in the US"

Derek Akkiprik on the investment team in Abu Dhabi gives us the beginner's guide to covered calls

We have given Cody and Bryce a week off from writing.  Please scroll down to read the articles.

Look out this week:  on 4th November we have the New York Mayoral elections.  Barring a natural disaster, the self affirmed socialist Zohran Mamdani, on a Democrat ticket, will be elected Mayor of New York.  It goes to show that the threat of socialism is never far away from us - and it seems each generation needs to learn afresh that socialism does not work.  Ironically, this could play well into Trump's hands for the rest of his term, but I think we could all do without the theatrics.

This week, I am in Abu Dhabi and London - the latter in part to attend the SALT conference to hear updates and insight from the US alternatives community.  

In a quick scheduling change we are going to have our US Tech investment adviser Cody Willard in London and Guernsey the week of 17th November.  Please do reach out if you would like to meet up.

Wherever you are, please let me wish you a wonderful and peaceful week ahead,

All the best,

Adrian

Co-Founder // Freedom Asset Management

Guernsey // Abu Dhabi // Hong Kong

M: +44 7781 40 1111 // M: +971 585 050 111 // M: +852 5205 5855

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“Expect a quieter holiday shopping season in the US”, 3/11/25

By Canaccord’s Justin Oliver

With the US stock market hitting new record highs seemingly daily, you’d generally anticipate one heck of a holiday shopping season in America.  Surely, consumers will plough gains from the market into presents for loved ones … and themselves?

Some may not be so lucky, however.  Layoff notices, particularly from tech companies, are on the upswing.  The adoption of artificial intelligence (AI) and robots is affecting headcounts, both in corporate headquarters and on the factory floor.  ADP Research reported last Tuesday that only 14,250 private-sector jobs were added in the four weeks ended October 11. Meanwhile, the year to date (ytd) performances of employment-related stocks may be disturbing forward-looking indicators: ManpowerGroup shares have fallen 47.0% ytd, Automatic Data Processing shares are 10.8% lower so far this year, and Paychex shares have lost 16.3% ytd compared to the S&P 500's 17.2% ytd gain.

While the Trump administration’s ‘One Big Beautiful Bill Act’ is expected to put more money into consumers’ pockets, other policies out of Washington aren’t helping matters.  Due to the government shutdown, most US government employees aren’t getting pay-checks, and starting next month, Supplemental Nutrition Assistance Program (SNAP) food benefits won’t be paid.

Yet the Department of Homeland Security will continue to arrest illegal aliens, which is having a chilling effect on immigration and on spending by anyone who’s in the country illegally.  Fewer foreign students have come to study in the US this year.  And don’t expect the Canadians to pick up the slack.  They’re still annoyed about US tariffs and are boycotting US goods and travel south of their border.

There will literally be fewer people shopping in the US this holiday, and those who are, say they’ll be spending less this season.  Here’s a look at some of the clouds hovering over consumer spending as the S&P 500 hits its latest record high:

(1) Visa’s results indicate all’s still well.  Visa reported earnings for its fiscal Q4 (ended September 30) rose 12% y/y, and adjusted earnings climbed 10% to $2.98 a share, beating analysts’ estimates by a penny. “US payments volume was up 8%, slightly above Q3, with e-commerce growing faster than face-to-face spend. Credit and debit were both up 8%, reflecting resilience in consumer spending,” said CFO Christopher Suh.  Higher-spending cardholders drove more of the growth during the quarter, which should continue during fiscal (December) Q1, when Suh expects low-teens adjusted EPS growth.  A price increase that Visa put through earlier this year benefited fiscal Q4 results and will help fiscal Q1 results as well.

Consumers surveyed during the first week of October by the National Retail Federation have a different story to tell about Q4 spending.  They plan to spend $890.49 on average this year on holiday gifts, food, and decorations.  While that’s the second-highest amount in the survey’s 23-year history, it is 1.3% less than last year’s record level.  Likewise, a PwC holiday survey found that consumers expect to reduce their seasonal spending by an average of 5% y/y, the first notable drop since 2020.

(2) AI and robots impact jobs.  It has been a tough couple of months for humans, with the adoption of AI and robots prompting layoff announcements.  Consumers will be less likely to splurge this holiday season if they’re afraid a pink slip will be in the mail in 2026.  Last week, Reuters reported that Amazon plans to lay off 30,000 employees from its corporate workforce. The cuts are part of a broader cost-cutting campaign aimed at reducing managers and flattening the organization.  CEO Andy Jassy said in June that Amazon’s workforce could shrink as a result of the company’s embracing generative AI, telling staffers that the company “will need fewer people doing some of the jobs that are being done today, and more people doing other types of jobs.”

Workers at Amazon’s warehouses escaped this round of layoffs but may be targeted in the future.  The New York Times obtained documents revealing that Amazon would like to double the amount of products it sells by 2033, but will avoid increasing warehouse headcount by increasingly automating its facilities.  At its most advanced facilities, Amazon’s robotics team aims to automate 75% of the operations.  More layoffs have been announced in recent months by Accenture, Intel, Microsoft, Oracle, Salesforce, and UPS among others.  Salesforce CEO Marc Benioff specifically highlighted the company’s AI adoption as a catalyst behind the layoff of 4,000 customer support staffers.

(3) The impact of government.  While temporary, the US government shutdown isn’t boosting consumers’ willingness or ability to spend. There are 730,000 federal employees working without pay, and another 670,000 federal workers furloughed without pay due to the shutdown, which began on October 1.  In addition, states were told not to pay November SNAP benefits because of a lack of funding due to the shutdown, something that has never occurred in previous government shutdowns.  There are nearly 42 million people who rely on SNAP, previously known as “food stamps.”

US Immigration and Customs Enforcement (ICE) officers aren’t being paid, but they continue working.  Arrests of illegal immigrants, anecdotally, has had an impact on shopping behavior.  Folks who are in the country illegally are more likely to stay home and avoid stores, restaurants, or entertainment areas where ICE agents might detain them.  Under the Trump administration, 527,000 illegal aliens have been deported, more than 1.6 million have voluntarily self-deported, and the borders have been closed, stopping the flow of illegal immigrants into the US, according to a DHS press release.  There are also fewer foreign students studying in the US this year.  International students arriving in the States on student visas declined 19.1% y/y, by 313,138 students, in August, the largest y/y drop ever except during the pandemic.  The most significant drop was among students arriving from China, an 86,647-person decline.  More recent data isn’t available due to the government shutdown.

The US consumer is the engine of the American economy.  We need to keep a close eye on consumers’ spending patterns in the coming weeks and months.

Justin Oliver

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"A beginner's guide to covered calls", 3/11/25

By Derek Akkiprik - Junior Investment Analyst

Covered Call ETFs: Turning Market Noise into Income

In 2025, markets have been anything but predictable.  Between stubborn inflation prints, shifting Fed expectations, and patchy equity leadership, investors are looking for ways to get paid to wait.  One strategy built exactly for this environment is the covered call ETF; funds that trade some potential upside for a steady stream of income.

How They Work

Covered call ETFs follow a simple rule:

• Step 1: Buy the underlying index (for example, the S&P 500 or Nasdaq 100).
• Step 2: Sell call options on that same index each month.
 The fund earns income from the option premium, which it passes along to investors, often as monthly distributions.

If the market moves sideways, that premium is your gain.  If the market rallies sharply, returns are capped once prices rise above the option strike price.  And if markets fall, the premium acts as a small cushion — but you still share in most of the downside (see illustrative example below):

Why They’ve Gained Attention

With yields still modest and volatility occasionally spiking, covered call ETFs have become popular among investors who want regular cash flow without shifting into bonds.  These funds have drawn billions in inflows.  They can yield anywhere from 7%–12%, depending on volatility and index behaviour.

In simple terms:

• When volatility rises, option premiums increase, boosting income.
• When volatility falls, income moderates but remains steady.
• Over time, performance depends heavily on whether markets grind sideways or run away to the upside.

How They Perform

Historically, covered call indices such as Cboe BXM (S&P 500 BuyWrite) and BXN (Nasdaq 100 BuyWrite) have delivered about 70 – 85 % of equity returns over long periods, but with roughly two-thirds of the volatility.

During flat or choppy markets like most of 2022/2023, these strategies often outperformed their benchmarks because the collected premiums outweighed muted equity moves.  In strong bull phases, they tend to lag since upside is given up beyond the call strike.

Role in a Portfolio

Covered call ETFs can serve as a middle ground between equities and bonds:

• They provide equity exposure with less day-to-day volatility.
• They offer monthly income higher than typical dividend yields.
• They work best when markets trade in ranges or volatility is moderate to high.

However, they’re not a substitute for core equity exposure. Because they cap gains, portfolios that rely solely on these funds will lag when markets rally sharply.  Many allocators instead use them as a so called “yield sleeve” within broader portfolios.

Downsides to Keep in Mind

• Capped Upside: In surging markets, gains stop at the strike price.
• Still Risk Assets: They can lose value in sell-offs — option income softens but doesn’t prevent losses.
• Return of Capital (RoC): Some distributions include RoC, which is a tax-efficient way to defer taxes but not additional profit.
• Fees: Management costs (≈ 0.35 – 0.60 %) are higher than basic index ETFs.

Where They Fit

For investors expecting sideways markets or volatility spikes, covered call ETFs are a practical tool. They convert short-term uncertainty into predictable income. But they should complement, not replace, long-term growth holdings.

Takeaway

Covered call ETFs aren’t a “free lunch,” but they can turn volatility into steady income for those comfortable giving up part of the upside. When markets meander, they shine; when they sprint, they trail. For investors who value steady cash flow and smoother returns, they’re a tool worth keeping on the shortlist.

We use this strategy as one of the building blocks of our Managed Income Fund (MINC).

Derek Akkiprik

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Disclaimers

Performance table

Capital at risk.  Returns in US dollars unless otherwise stated. Source: * Estimates Freedom Asset Management as at 1/11/25. Please note depending upon how the funds are invested a small number of underlying funds can price 1-2 days after we take our estimates above so final published NAVs may vary.  Estimated GBP returns are from a $1.25 FX rate on 31/12/24.  Please note launch dates of USVIP 12/2/25 and MINC 20/5/25. ** Note fund prices quarterly and includes 5% discount to NAV expressed as 5% performance above for 2024, *** Morningstar as at 1/11/25, I shares for CIM Dividend Fund, F shares for PHC Global Value Fund.

General

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