Riverwater Partners' Q1 2025 investor letter offers insights into their Small Cap Strategy, which has outshone the Russell 2000 index. This success is attributed to their meticulous stock selection and strategic sector allocation, emphasizing a bottom-up fundamental research approach over broad macroeconomic predictions. Amidst ongoing discussions about trade tariffs and U.S. fiscal policies, the firm's core focus remains on identifying companies of exceptional quality. A prominent holding within their portfolio is StoneX Group Inc. (SNEX), recognized for its defensive attributes within the financial services sector. The firm believes that SNEX, as a capital markets operator, stands to gain significantly from heightened market volatility. This perspective suggests a strategic advantage for StoneX Group in an unpredictable economic landscape, positioning it as a stable asset during turbulent times.
While StoneX Group demonstrates robust performance and resilience, achieving substantial year-over-year earnings growth and an impressive 52-week stock appreciation, Riverwater Partners also casts a glance towards the burgeoning field of artificial intelligence. The investment firm acknowledges SNEX's investment merits but posits that certain AI-focused equities could deliver superior returns in a shorter timeframe. This signals a nuanced investment philosophy, balancing stability and growth potential. Riverwater Partners' strategy underscores the importance of adaptability and a keen eye for emerging opportunities, even as they maintain confidence in their established defensive positions. The juxtaposition of a seasoned financial firm like StoneX Group with the dynamic potential of AI stocks reflects a comprehensive approach to portfolio management in a complex global market.
StoneX Group's Resilience in Financial Markets
Riverwater Partners' Q1 2025 investor letter sheds light on their investment approach, particularly highlighting StoneX Group (SNEX) as a key defensive player in the financial services landscape. The firm's Small Cap Core Strategy has notably surpassed the Russell 2000, a testament to their rigorous bottom-up fundamental research and astute sector allocation, rather than relying on top-down macroeconomic forecasts. This strategic emphasis on intrinsic company value positions them to navigate market complexities effectively. In a period marked by considerable debate over tariffs and U.S. fiscal policy, Riverwater Partners maintains a sharp focus on identifying high-caliber companies. StoneX Group, with its strong capital markets operations, is seen as uniquely positioned to capitalize on increased market volatility, offering a degree of stability and defensive strength in an otherwise unpredictable environment.
StoneX Group's financial performance reinforces its defensive credentials, boasting a 7.92% one-month return and an impressive 82.81% gain over the past 52 weeks, closing at $91.38 per share with a market capitalization of $4.47 billion as of June 27, 2025. Furthermore, its Q1 2025 earnings surged by 35% year-over-year, reaching $71.7 million. Riverwater Partners views SNEX as a cornerstone of their portfolio, a defensive bulwark against market fluctuations. This highlights the company's ability to maintain a strong financial footing and generate substantial earnings even in a challenging economic climate. Their operational model, deeply rooted in capital markets, allows them to turn market volatility into an advantage, making them an attractive option for investors seeking resilience and growth in the financial sector.
Strategic Investment Shifts: Beyond Traditional Finance to AI
Despite StoneX Group's robust performance and its role as a defensive holding, Riverwater Partners also explores investment avenues beyond traditional financial services, particularly in the rapidly evolving artificial intelligence sector. While acknowledging the significant potential of SNEX, the firm suggests that AI-driven companies might present opportunities for higher and quicker returns. This nuanced strategy reflects a dynamic investment philosophy that seeks to balance the stability offered by established defensive firms with the aggressive growth potential of disruptive technologies. The market's current discourse, heavily influenced by technological advancements and economic shifts, necessitates a versatile approach that can adapt to new frontiers of value creation. Thus, while StoneX Group provides a solid foundation, the firm is keen on exploring innovative sectors that promise accelerated capital appreciation.
This strategic diversification into AI stocks underscores a forward-looking perspective, aiming to capture the exponential growth characteristic of emerging technologies. Riverwater Partners’ consideration of AI, even when not directly holding StoneX Group on its “30 Most Popular Stocks Among Hedge Funds” list, shows a willingness to pivot and seize opportunities in high-growth areas. The firm actively seeks out undervalued AI stocks with substantial upside potential, particularly those that could benefit from broader economic trends such as Trump-era tariffs and the onshoring movement. This layered investment strategy, combining a defensive core with a high-growth satellite, aims to optimize returns across different market cycles and technological paradigms. It signifies an astute understanding of market dynamics, where both resilience and transformative growth are crucial for long-term success.
A recent comprehensive analysis reveals a noteworthy divergence in student loan repayment behavior between fresh and long-standing borrowers. Those new to federal student loans are consistently demonstrating a superior ability to meet their payment obligations punctually, largely owing to their heightened understanding of available repayment strategies. This stands in stark contrast to more seasoned borrowers, who are increasingly encountering difficulties, marked by a rise in delinquencies. This troubling trend among older borrowers is intricately linked to a landscape of frequently shifting repayment policies and the pervasive impact of persistent inflationary pressures.
\nTimely Payments: A Deeper Dive into the Trends
\nIn a compelling report released this week by Pew Research, a renowned nonpartisan think tank, findings from a July 2024 survey paint a clear picture: an impressive 92% of recent federal student loan recipients are diligently making their payments on schedule. This group, defined by Pew Research, includes individuals who were either just beginning their loan journey, still pursuing their studies, or within the crucial six-month grace period post-graduation at the onset of the COVID-19 pandemic.
\nFor context, the broader population of student loan holders presents a less favorable scenario, with only 77% managing to keep up with their payments. This disparity underscores that new borrowers, who constitute roughly a quarter of all student loan recipients, are navigating their financial responsibilities more effectively. According to Ama Takyi-Laryea, a senior manager at Pew Research, this success is predominantly a result of enhanced outreach efforts from the Department of Education.
\n\"These newer borrowers are stepping into a repayment system that had been paused and then reactivated, accompanied by a deliberate push from both current and past administrations to improve communication,\" Takyi-Laryea elaborated. \"The clarity in communication has markedly improved compared to previous periods.\"
\nThis heightened awareness has empowered a significant portion of new borrowers—70% of whom reported experiencing financial difficulties—to enroll in repayment plans specifically tailored to their circumstances. Notably, some income-driven repayment options can reduce monthly payments to zero, a benefit utilized by a third of the new borrowers surveyed.
\n\"Their knowledge of repayment avenues meant they were more likely to secure affordable payment plans, including those with zero dollar monthly payments,\" Takyi-Laryea observed. \"This newfound understanding, I believe, has directly contributed to their improved payment performance.\"
\nMeanwhile, an analysis from the Federal Reserve Bank of New York indicates a concerning trend: the average age of a delinquent student loan borrower has climbed to 40.4 in the first quarter of 2025, up from 38.6 in the first quarter of 2020. This shift suggests that fewer young borrowers are falling behind on their payments compared to older generations.
\nAdding to this, TransUnion, a leading consumer credit reporting agency, reported that approximately one-third of student loan borrowers were 90 days or more past due on their payments by April. This figure represents a significant increase of over 10 percentage points since February, when student loan servicers resumed reporting to credit agencies. It also marks an almost 20 percentage point surge compared to February 2020, prior to the government's pandemic-induced payment pause.
\nTakyi-Laryea suggests that the challenges many borrowers face in resuming payments stem from the intricacies of a constantly evolving repayment framework. For instance, the Saving for a Valuable Education (SAVE) plan has been in a year-long pause, keeping its participants in forbearance. Furthermore, a proposed new repayment plan by Congress could potentially increase monthly payments for some families, if enacted.
\nCompounding these issues, the post-pandemic inflationary surge has significantly strained many borrowers' finances, with inflation rates remaining above desired levels. Many individuals report feeling less financially secure than they were before the pandemic, a crucial factor influencing their capacity to repay their loans, as highlighted by Takyi-Laryea.
\nThe evolving landscape of student loan repayment necessitates continued vigilance and adaptation. While newer borrowers demonstrate the positive impact of improved information and tailored repayment strategies, the increasing delinquencies among older borrowers highlight systemic challenges that demand comprehensive solutions. Addressing policy inconsistencies, providing accessible financial education, and alleviating economic pressures are vital steps toward fostering a more stable and equitable student loan environment for all.
In recent trading, the US dollar has demonstrated a largely steady performance, holding within limited fluctuations against the principal G10 currencies. This composure in the dollar's value is occurring concurrently with its gentle decline against various emerging market currencies. Notably, legislative developments in the United States, specifically the advancement of the budget bill, which saw the removal of a contentious 'revenge tax' provision, appear to be influencing market sentiment. Concurrently, broader global financial markets are witnessing diverse trends, with stock indices in Asia continuing their robust ascent following substantial gains, and European sovereign bond yields experiencing a marginal softening, reflecting an intricate interplay of economic and policy factors.
The current behavior of the US dollar suggests a period of consolidation. This trend is particularly evident when observing its interactions with the G10 currencies, where price movements remain contained. Conversely, a more nuanced picture emerges in relation to emerging market currencies, where the dollar has experienced some depreciation. This divergence might be indicative of varied economic pressures and policy responses across different global regions.
A significant domestic factor contributing to the prevailing market environment is the ongoing progress of the US budget legislation. The removal of the 'revenge tax' (Section 899) from the bill has been a notable development, potentially alleviating concerns among certain market participants and contributing to the dollar's measured response. Such legislative actions often play a crucial role in shaping investor confidence and currency valuations.
Simultaneously, the broader international financial landscape presents a mixed but generally optimistic outlook in some regions. Asian equity markets, represented by the MSCI Asia Pacific Index, have shown remarkable resilience and growth. After a significant surge in the previous week, these markets extended their gains, signaling robust investor appetite and potentially strong underlying economic fundamentals in the region.
In contrast, the European bond markets have experienced a slight easing in yields. The JGB 10-year yield, in particular, observed a modest decline, and this trend was mirrored by softer yields across Europe. Such movements in bond yields often reflect shifts in investor expectations regarding inflation, economic growth, and central bank monetary policy.
The confluence of these factors—a stable yet selectively softening US dollar, a progressive US budget agenda, buoyant Asian equities, and declining European bond yields—paints a picture of a global financial system undergoing subtle shifts. Investors and analysts continue to monitor these trends closely, anticipating their potential implications for future market directions and investment strategies.