**Market Momentum Continues in Q3**
The third quarter saw the market extend its strong run, with the S&P 500 Index surging 5.89% and posting a 22.08% gain year-to-date. The ClearBridge Dividend Strategy outperformed the benchmark, driven by its diversification and valuation discipline.
While artificial intelligence (AI) stocks took a breather in the quarter, our holdings in Alphabet, Apple, Broadcom, Meta Platforms, Microsoft, and Oracle are well-positioned to benefit from AI growth. However, we maintain a disciplined approach to valuation and a conservative portfolio construction, resulting in lower exposure to these names compared to the S&P 500.
The Federal Reserve’s half-point rate cut in the quarter had a positive impact on interest-rate-sensitive sectors such as housing, pipelines, real estate, and utilities. Our overweight in these areas benefited from the lower interest rates, as did our stocks with company-specific drivers. AvalonBay Communities, Enbridge, American Tower, and Edison International were among the beneficiaries.
While our IT positioning drove outperformance in the quarter, Intel’s disappointing results and profitability guidance led us to exit our position. The Federal Reserve’s successful inflation management and China’s recent economic stimulus efforts should support a soft landing for the economy. As the U.S. election approaches, we remain optimistic about our portfolio’s positioning, particularly in high-quality dividend growers, which have lagged the S&P 500 over the past 18 months.
Our differentiated portfolio currently trades at a meaningful discount to the broader market, making high-quality dividend payers more attractive. We expect investors to continue gravitating towards these stocks, driven by their relatively attractive yields and growth prospects.
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