Language | 
English
Spanish
The long and strong investment performance of the LOM Balance Fund took a breather during the third quarter of 2021 as markets as risk markets slumped in late September. The Fund declined by 1.55% during the period. However, over the past 12 months, the Fund has provided a return of 25.86%, outperforming its benchmark which rose by 11.46%. The outperformance is attributable to an overweight in equities, focus on smaller cap stocks as well as other strategic and tactical allocations.
The global economic recovery from the COVID-19 pandemic remained relatively robust over Q3, but progress was uneven as policymakers struggled with the highly contagious delta variant, elevated unemployment and higher consumer and producer product prices. Rising commodity prices in addition to stretched supply chains challenged the corporate sector as economies reopened across the globe. Reopening progress varied considerably by region and sector.
In the U.S., Washington moved to the forefront for investors. During the final days of the quarter, the U.S. Congress passed a stopgap spending bill permitting the government to stay open until Dec. 3. The extension allowed politicians to focus on raising the debt ceiling and passing President Biden’s stimulus initiatives – a $1.2 trillion infrastructure (PAVE) plan and a $3.5 trillion “soft” infrastructure plan. The $1.2 trillion infrastructure bill had bipartisan support and has already passed the Senate; however, full passage has been delayed as moderate and progressive Democrats negotiate over terms of the “soft” bill.
Third quarter equity market gains were muted as an early rally was given up in the September correction. Global equity benchmarks were down across the board in September in what is seasonally the worst-performing month for equities. The MSCI World Index fell by 0.76% between July 2nd and October 1st, our weekly cut off points for the quarterly NAV’s. Within the major equity indices, Financials (+2.72%), Utilities (+1.78%), and Communication Services (+1.60%) saw the strongest gains in the quarter. Industrials (-4.22%), Materials (-3.51%) and the Energy sectors (-1.72%) were the worst hit.
In fixed income markets, the Treasury yield curve largely remained the same as during the previous quarter, with the belly of the curve moving up a few basis points. Credit spreads were stable during the second quarter; the spread between BBB corporate bonds and the ten-year Treasury has remained at around 1%., which is the lowest in the last 20 years. During the July and the September FOMC meetings, policymakers unanimously voted to maintain the Fed Fund Target Rate at the zero to 25 basis point range. According to the latest FOMC dot plot, officials are now evenly split on whether the central bank should raise rate next year. The median projection indicates that the first interest rate hike will be in 2023. Fed chairman Jerome Powell has changed his narrative on the quantitative easing program this summer, opening doors to start tapering as soon as the end of this year, subject to economic conditions.
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.
