LOM Balanced Fund Manager’s Report Q3 2026

Over the third quarter, the Fund appreciated 0.78%. Markets were more volatile throughout the period, as continued tensions in the Middle East pushed energy prices higher and reinforced inflation concerns. Despite this backdrop, the S&P 500 gained nearly 2%, with AI continuing to be a driving theme. The Fund has delivered 8.20% over the past year, with annualized returns of 12.89%, 5.46% and 7.47% over three, five and ten years, respectively.

The renewed rise in oil prices, as it became clear that hostilities and the blockade of the Strait of Hormuz would continue, was the defining macroeconomic development of the quarter. Disruption to energy supplies kept inflationary pressure elevated and contributed to a broad sell-off in government bonds, with longer-dated yields rising sharply as investors priced a more restrictive path for monetary policy. The Fed increased its policy rate by 0.25 percentage points; however, yields rose by more than 0.80 percentage points on five-year bonds and by 0.66 percentage points on 30-year bonds. These moves created the greatest drag on the portfolio. Holdings in the LOM Stable Income Fund and iShares Preferred & Income Securities declined, as their exposure to longer-duration instruments made them particularly sensitive to rising yields. The increase in interest rates also weighed on financials, as concerns about slower growth and lower balance-sheet valuations pressured the sector during the quarter.

Equity markets’ modest gains reflected uneven performance across regions and sectors. The Fund benefited most from its software exposure through the iShares Expanded Tech-Software holding, while the LOM Innovation Opportunities Fund also added value as demand for artificial intelligence and digital infrastructure remained supportive. Japan and healthcare were additional sources of strength through the iShares MSCI Japan ETF and Vanguard Health Care ETF, and broad U.S. equity exposure contributed positively. European markets ended the period broadly flat. Although energy exposure provided some support, the region’s significant weighting in financials weighed on performance.

We continue to favor diversification across asset classes, equity markets and regions. The quarter demonstrated the benefit of maintaining exposure to distinct return drivers: software, energy, Japan and healthcare contributed positively, while higher interest rates weighed on fixed income, preferred shares, utilities and real estate. With inflation and interest-rate risks still elevated, we are maintaining a balanced allocation that preserves participation in long-term growth themes while retaining liquidity and defensive exposure to help manage further volatility.

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.