If only June 30 didn’t fall on a Monday, but rather a Tuesday this year, a catchier title to this might have been “June 30 – Taco Tuesday!” But the calendar gods chose not to cooperate, and there are likely a bajillion puns to play on the Big Beautiful Bill, but there are only so many hours in a day (but feel free to offer alternative titles as a comment).

In early April, we were speaking to an audit partner from a large accounting firm, and we asked him how lucky our respective clients were that the tariffs didn’t happen on 12/31 – in time to make them fair game for the audit review process of each investment’s valuation. He answered simply, “Very!”

The current level of uncertainty is “high” (refraining from superlatives). It feels a lot like March 2020 all over again. Faced with uncertainty, investors are asking themselves, “Which investments are poised to be winners, or losers, from the geopolitical gyrations?”

More frustratingly, after thinking one’s logic through, the next day the calculus changes again – often in a potentially unforeseen manner.

Geopolitical Disruptions

While the timing of the tariffs may have delayed the inevitable, the coming month/quarter end will be one of the more interesting and challenging in recent memory for private asset managers when it comes to valuing their portfolio investments. Typically, geopolitical events play a relatively minor role in the valuation process, as they have historically been slow to evolve and relatively well telegraphed in advance.

While President Trump said that changes were coming on the campaign trail, the post “Liberation Day” (April 2, 2025) whipsawing of the capital markets might indicate that, as much as anyone took him at his word, perhaps the breadth of his actions was underestimated.

And, to paraphrase Mr. Isaac Newton, for every action, there is a reaction – and there have been reactions from others within the United States, reactions from other countries, and reactions from the global capital markets – some may have been anticipated, others, less so.

The news that U.S. auto manufacturers are planning around China’s ban on the export of rare earth magnets is a great example: the tariffs may have been intended to open negotiations for a better trade outcome for the U.S. and more U.S. manufacturing, but China’s restriction on exporting the rare earth magnets but not a finished motor containing those same magnets may have the exact opposite impact on U.S. manufacturing than was the original intent of the tariffs. A U.S. motor manufacturer went from hoping for more work to maybe losing work – something that could/would impact not only an equity investor, but also a creditor.

And that’s one example of the thought process that all GPs must go through on an investment-by-investment basis this quarter.

Domestic Disruptions

If the geopolitical landscape wasn’t challenging enough, the President’s domestic agenda is shaking things up. Few questioned that any number of “green initiatives” (e.g., subsidies, licenses, etc.) were handouts from the left. More than a few businesses invested a lot of capital in companies/projects that are now dead. Did the world need 4 million EV manufacturers? Likely no, and many of them would have died regardless of who was in the White House. But some of the projects may well have made long-term sense but are now likely doomed to end as an extraordinary item on a company’s financials and/or bankruptcy filing.

Given the weaponization of politics, investors are likely not going to be bitten twice and will be more conservative about believing in a political promise again (or will only take on pet projects if the project is derisked somehow).

The Big Beautiful Bill is currently being debated and, from media reports from the right and left, doesn’t seem to be the instrument or reform that many hoped for. In fact, it’s raising alarms about the U.S.’s fiscal responsibility and the increased likelihood of a recession, inflation, and/or a fracture in the bond market.

Tracking and Documenting Valuations in a Changing Landscape

While the World Trade Organization has done good job of tracking country by country tariffs, outside of Stout’s AlphaPipe, we’re not aware of any capability in the market for GPs to monitor portfolio companies and the portfolio companies’ respective customers and suppliers systematically for exposure to events such as the above that may impact the values of their investments outside of the “typical considerations” of growing markets and market share.

As such, the tracking potential impacts on portfolios is a much more manual, time- and thought- consuming process — one that is almost certainly destined for revisions in the coming months/quarters.

Asset owners will be well served to be thoughtful in their assessments and thorough in their documentation. Change is the new constant, and whether the questions come from third-party valuation partners (like Stout), auditors, investors, regulators, or courts, the more thoughtful the process and the better the documentation, the easier to support current and future valuations in times of uncertainty.