LOM Balanced Fund Manager’s Report Q2 2023

In Q2 2023, the LOM Balanced Fund (LOMBALF BH Equity) delivered a 3.75% return, exceeding both the index return of 3.54% and the average competitor return of 2.15%. Consequently, the fund’s year-to-date growth was lifted to 8.05%, compared to the index at 8.87% and the competitor average at 6.28%. At the end of Q2 2023, we held 70.3% in equities, 29.5% in fixed income and 0.2% in cash. We have taken active positions in the semiconductor industry to take advantage of the increased digitization and AI automation, financials in hopes to benefiting from mean reversion as the US financial system stabilizes after the regional bank failures, and international exposure to India as it benefits from cheaper oil out of Russia and favorable regional positioning.

The broader economic picture in Q2 2023 signaled a return to stability, with inflation rates moderating from their recent highs. According to the Bureau of Labor Statistics, US inflation dropped from 6.0% to 4.0% over the quarter. In the European Union, despite the ongoing effects of the conflict in Ukraine, inflation eased from 6.9% to 5.5%. China’s inflation reduced from 0.7% to 0.0%, influenced by its slower recovery from the pandemic and semiconductor trade restrictions. In Japan, a marginal decrease was observed from 3.3% to 3.2%, consistent with its history of low inflation.

Looking forward, central banks are emphasizing inflation reduction, with the Federal Reserve signaling a further 0.50% interest rate hike this year. The labor market remains resilient despite some industry-specific cutbacks, balancing potential recessionary signals. Risks for the coming year include challenges in the property sector due to increased borrowing costs and decreased utilization, potential impact of a China economic slowdown on global economy, and the ongoing situation in Ukraine. Despite aggressive rate hikes revealing certain economic vulnerabilities, central banks are aiming for a return to 2% interest rates.

The information contained in this article is for information purposes only, and represent the views of the author. It is not intended as specific investment or financial advice, or a recommendation or solicitation to buy or sell any security. Any investments or strategies listed in this article may not be suitable for all investors. Past performance is not indicative of future performance, and as with any investment, prices may fluctuate. It is recommended that advice is sought from a qualified investment professional prior to implementing any financial plan. LOM has made every effort to ensure that the contents herein have been compiled from sources believed reliable, however LOM does not warrant the accuracy, adequacy, timeliness, or completeness of this information expressly disclaims liability for errors or omissions in this information.