New York, NY – The Fund (MUTF:TGCEX, I Share) saw a net return of 7.49% during the second quarter, slightly below the Russell 1000® Growth Index return of +8.33%. The relative underperformance was mainly attributed to negative security selection effects in sectors such as information technology, consumer discretionary, and healthcare. Year-to-date performance through the first half of CY24 showed The Fund (I Share) outperforming the Russell 1000® Growth Index with a return of +22.04%. This outperformance was driven by positive security selection effects.
Equity markets overall experienced growth in the second quarter, with the NASDAQ advancing 8.3%, the S&P 500 up 4.3%, and the DJIA declining 1.7%. For the first half of 2024, the S&P 500 showed a total return of +15.3% despite slowing economic growth. The price of crude oil remained relatively flat during the quarter but increased by 17.3% in 2024. Gold also saw gains, with a 3.5% increase in the quarter and a +9.7% increase year-to-date.
Concerns over consumer weakness were noted, particularly in discretionary spending and housing, while consumer sentiment as measured by the University of Michigan Consumer Sentiment Index dropped to 68.2 in June. The labor market showed signs of cooling with a 4.1% unemployment rate in June, the highest in over 2 1/2 years. This may give the Federal Reserve room to potentially cut rates in September, although caution is urged to avoid the “stop-start” scenario seen in the 1970s.
Globally, central banks have already begun easing cycles, with key banks such as the Swiss National Bank, Bank of Canada, and European Central Bank taking action. The focus remains on whether the Federal Reserve will maintain its “data dependent” approach amidst a U.S. Presidential election in the latter half of the year. Meanwhile, the USD has strengthened against other currencies as the 2yr UST/10yr UST yield curve remains inverted, a historical indicator of an impending recession.
In terms of sector weightings, information technology and consumer discretionary sectors weighed down relative results the most during the second quarter, while industrials and consumer staples showed positive impacts. Strong performance from companies in the information technology and communication services sectors, such as Nvidia Corporation and Alphabet Inc., contributed to positive returns. However, weaker performance was seen in the healthcare and consumer discretionary sectors, particularly with companies like DexCom, Inc. and Ulta Beauty, Inc.
Looking ahead, the investment team at TCW emphasizes the importance of active management in navigating market conditions and selecting the right stocks. The team draws parallels between portfolio management and the challenging role of a Ryder Cup captain, highlighting the importance of selecting the right “players” (stocks), optimizing the “team” (portfolio construction), and considering various unknowns and market conditions (weather).
Ultimately, the impressive performance of the Fund during the second quarter showcases the dedication to thorough research, strategic portfolio construction, and active management by the TCW team. As market conditions continue to evolve, the team remains vigilant in their approach to deliver strong returns for investors.
