Los Angeles, CA – US equity markets saw record highs in Q1 of this year, supported by a robust US economy, a trend of disinflation, and a rise in corporate profit growth. The S&P 500® Index surged by 10.56%, extending the strong rally that began in late 2023. Various sectors like communication services, financials, energy, industrials, and technology all saw double-digit percentage increases, while higher yielding sectors like real estate, utilities, and consumer staples lagged behind.

Despite geopolitical conflicts and macroeconomic uncertainties like ongoing conflicts in the Middle East and Ukraine, as well as inflation above the Federal Reserve’s target of 2%, the market remained relatively unfazed in the first quarter. Earnings continued to grow steadily, dispelling predictions of an impending recession. However, volatility has begun to increase as April progresses.

In Q1, the portfolio’s performance met total return expectations, driven by premium income and solid capital appreciation from Core Value, Dividend Recovery, and Dividend Growth holdings. Top contributors like nVent Electric, Corebridge Financial, and Lamar Advertising showcased strong performances in their respective sectors.

nVent Electric, a provider of electrical connections and protection solutions, showed consistent growth supported by factors like electrification, sustainability, and digitalization. Corebridge Financial, a life insurance and retirement solutions company, benefited from the current interest rate environment. Lamar Advertising, known for its outdoor advertising structures, reported steady results with a focus on returning cash to shareholders.

However, Cable One, Philips, and Universal Health Realty Income Trust were among the bottom contributors in Q1. Cable One faced challenges from competition and subscriber growth, while Philips dealt with uncertainties due to a CPAP machine recall. Universal Health Realty Income Trust, a healthcare REIT, faced headwinds amidst rising interest rates.

In Q1, the portfolio added Alliant Energy, Evergy, and Ryanair Holdings, seeking opportunities in the utilities sector and low-cost airline market. With market-cap weighted indices at new highs and the S&P 500® Index trading at 23X earnings, value-conscious investors may have concerns about future returns. However, looking beyond the S&P 500® Index to more diverse opportunities within the value investment universe could present favorable positions for value stocks. Value securities remain historically cheap relative to growth stocks, indicating potential for solid returns in the long run.