Large Cap Value Strategy Navigates Market Challenges in Q3 2025
As the year winds down, investors grapple with persistent geopolitical tensions, policy uncertainty, and inflation risks. The U.S. economy navigates a complex landscape of interest rate changes, inflation concerns, and labor market dynamics. Despite these challenges, U.S. assets remain attractive due to solid economic data and strong corporate earnings.
The actively managed large cap value strategy, focusing on fundamental research, aims to capture high excess capital yield and sustainable dividends. In the third quarter of 2025, equity markets rebounded, with growth outperforming value. Technology, communication services, and consumer staples led the pack, while health care, consumer staples, and consumer discretionary sectors lagged.
The strategy's performance was influenced by stock selection within communication services and real estate sectors. Centene Corp. (CNC) and Kenvue, Inc. (KVUE) were among the largest detractors, while Warner Bros. Discovery, Inc. (WBD) and Micron Technology, Inc. (MU) were among the largest contributors. Despite this, the strategy underperformed the Index due to unfavorable stock selection in health care, consumer staples, and consumer discretionary sectors.
Market leadership has expanded beyond mega-cap stocks, with the U.S. stock market facing geopolitical tensions, policy uncertainty, and inflation risks. The Fed is expected to cut rates further due to emerging signs of labor market softness.
As the year's final stretch approaches, investors must navigate persistent challenges. However, the actively managed large cap value strategy continues to focus on fundamental research, aiming to capture high excess capital yield and sustainable dividends. Despite recent underperformance, the strategy remains committed to its investment approach, seeking to capitalize on opportunities in the evolving stock market landscape.
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