The US equity market experienced a remarkable third consecutive quarter of growth, with the S&P 500 Index reaching new heights. However, this performance was largely driven by a select group of mega-cap technology companies, resulting in a significant gap between the market-cap weighted S&P 500 Index and its equal-weighted counterpart. Meanwhile, growth stocks significantly outperformed their value counterparts.
Despite the strong market performance, annualized first-quarter GDP growth was revised downward to 1.4%, indicating a gradual moderation of the economy. Stubborn inflation and a tight labor market tempered expectations for interest-rate cuts by the Federal Reserve this year.
In terms of sector performance, healthcare, financials, and communication services were the top contributors, while consumer staples, energy, and information technology lagged behind. Security selection played a crucial role in driving performance, with notable contributors including Broadcom, Alphabet, and a lack of exposure to Intel.
As the 2024 US election cycle approaches, policy positioning on fiscal deficits, tax policy, and trade is likely to become increasingly relevant to financial markets. Our focus remains on stock selection as the primary driver of portfolio returns, and we have identified opportunities in industrials, energy, and real estate outside of the technology sector.
At the end of the period, our largest overweights were in healthcare and utilities, while our largest underweights were in consumer staples and real estate. The top ten holdings in our portfolio included Microsoft, Apple, Nvidia, Amazon, Alphabet, Meta Platforms, Eli Lilly, Broadcom, JP Morgan Chase, and UnitedHealth Group.
Investors should be aware that past performance is not a guarantee of future results, and that the investment return and principal value of an investment will fluctuate. It is essential to carefully consider a fund’s investment objectives, risks, charges, and expenses before investing.
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