As of 8:00 a.m. Friday June 12th, North American markets are tracking higher than a week ago. After a week filled with dramatic headlines, sharp sell-offs, and equally sharp recoveries, the end result is that we're likely to finish the week with a gain—another reminder that short-term volatility often looks much more significant in the moment than it does in hindsight.

As I mentioned in last week's newsletter, the initial sell-off was triggered by a surprisingly strong U.S. jobs report. Counterintuitively, what would normally be considered good economic news caused markets to pull back. Unemployment declined and job creation came in stronger than expected, challenging the narrative that artificial intelligence is rapidly eliminating jobs across the economy. While certain industries are certainly being affected, the overall employment data continues to show a resilient labour market.

From our perspective, the volatility created opportunities. On Thursday (June 4^th), before the initial sell-off, we completed a portfolio rebalance, trimming some positions that had performed exceptionally well and reallocating capital into areas where we saw better relative value. The timing happened to be favourable, as markets were at all-time highs.

Then on Friday, although we had not anticipated doing additional trading, the sharp decline in several assets that we wanted to own created an opportunity. We selectively added to a position within the Diversifier Pool, taking advantage of lower prices and elevated fear levels. Rather than reacting emotionally to the market decline, we used the volatility to improve positioning where we saw value.

Part of the volatility is likely related to the wave of high-profile IPOs expected to enter the market. Large institutional investors and asset managers need to raise cash to participate in these offerings, which means selling existing holdings to fund new purchases. That process can create temporary selling pressure even when the broader economic backdrop remains constructive. It is something we highlighted several weeks ago as a potential source of market volatility.

Will I be buying SpaceX IPO?

In a word, no—at least not at the IPO. But my reasoning has little to do with SpaceX itself and more to do with my general skepticism toward most IPOs. I prefer to let the initial excitement fade and the market establish a fair value before investing. Creative Planning’s Charlie Bilello put together the top 25 IPOs of the last 15 years and shows the median return after 1-year has been -31% with the median maximum drawdown from the first day closing price has been over 50%.

With  Peter Mallouk stating “over the last 40+ years, the average US IPO returned just 6.0% annually in its first 3 years, roughly half the return of the broader US stock market.”

While I’m not actively chasing shares at current valuations, most our clients already have a small indirect exposure through one of our largest holdings in the Foundation Wealth Equity Pool. Fidelity portfolio manager Mark Schmehl has invested in SpaceX through private-market allocations over several funding rounds, long before today's valuation levels. As a result, our clients have participated in the company's growth through much lower entry prices.  For the time being, I’m happy with this exposure.  

This highlights an important distinction in investing: a great company is not always a great investment at every price. SpaceX may very well continue to be an exceptional business, but valuation matters. Historically, many IPOs have delivered mixed results after their initial excitement fades, even when the underlying businesses are strong. For that reason, I generally prefer patience over chasing the latest market enthusiasm.