The market’s narrow focus persisted in the second quarter, with chipmaker Nvidia’s extraordinary rally driving nearly half of the S&P 500 Index’s returns. Meanwhile, investor sentiment about the economy and interest rates improved, fueled by encouraging inflation data that revived hopes of a monetary easing cycle this year. Despite mixed economic data, including a slower-than-expected first-quarter GDP, the conclusion of the first-quarter earnings season painted a promising picture of corporate profits holding up against interest-rate headwinds.
Against this backdrop, the S&P 500 Index advanced 4.3% in the second quarter, bringing its year-to-date gain to 15.3%. In contrast, the Lazard US Equity Focus Portfolio rose 1.9%, underperforming its benchmark, the S&P 500 Index.
Notable stock performances included Alphabet, which reported solid results driven by strong expense management, margin expansion, and investments in artificial intelligence. Goldman Sachs also reported strong quarterly results, driven by revenues in its markets and investment banking segments, as well as a lower-than-expected provision for credit losses. Estée Lauder, a prestige beauty company, reported strong earnings, but its stock fell on lower-than-expected Q4 guidance and concerns around consumer/macro data points.
Accenture, which lagged after announcing plans to purchase Unlimited, an integrated customer engagement agency, is well-positioned to benefit from structural growth opportunities as more enterprises move to the cloud, upgrade data, and digitize their business processes.
Looking ahead, we expect continued volatility as central banks balance financial stability and inflation control. While artificial intelligence has transformative potential, we are cautious about valuations in certain stocks reaching unsustainable levels in the short term. Our investment philosophy remains focused on quality companies that can sustain elevated levels of financial productivity, supplemented by companies that can improve their financial productivity. A broadening out of index participation will present a better environment for quality investing.
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