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During 2025, the LOM Fixed Income Fund generated a return of 5.27%, benefiting from stronger demand for short to intermediate duration bonds amid expectations for rate cuts and a more accommodative monetary policy backdrop. Over the past three years, the Fund delivered a net annualized total return of 5.18%, reflecting consistent income generation and disciplined portfolio positioning.
The fourth quarter of 2025 underscored continued consumer resilience despite ongoing macroeconomic uncertainty, particularly around U.S. fiscal and trade policy. Retail spending remained firm, supported by a relatively strong labor market and sustained wage growth. Consumer-facing companies broadly exceeded earnings expectations, with management teams citing durable demand, improved inventory discipline, and easing input costs as key contributors to margin stability. Travel, leisure, and discretionary sectors were notable areas of strength, signaling that household confidence remained intact even as borrowing costs stayed elevated.
This backdrop followed a robust third quarter for the U.S. economy, with real GDP expanding at an impressive 4.3%, following growth of 3.8% in Q2, reinforcing the narrative of a durable expansion. Business investment, driven in part by significant AI-related spending, remained stable while consumer activity continued to serve as the primary engine of growth, helping to offset softness in global trade. Together, the momentum from Q3 and the earnings strength in Q4 highlight the resilience of the U.S. economy heading into 2026, with fundamentals continuing to support corporate profitability and investor confidence.
During the quarter, the Federal Reserve implemented two rate cuts, lowering the target range to 3.5%–3.75%, despite data challenges stemming from a government shutdown. Chair Jerome Powell characterized this level as the “upper end of neutral,” suggesting the potential for a pause in further easing into 2026. Tightening at the short end of the yield curve appears largely complete, with the curve continuing its normalization and market expectations now pricing in rate increases approximately 18 months forward. Corporate credit spreads tightened modestly overall, although select issuers experienced widening. Notably, CoreWeave and Oracle saw meaningful spread widening amid increased investor scrutiny of AI-related return dynamics, particularly in the context of incremental debt issuance.
Against this backdrop, we continue to invest selectively and opportunistically within investment-grade credit. We are also maintaining an approximately 14% allocation to hybrid securities, which currently offer yields in excess of 6%, providing an attractive source of income while maintaining a disciplined risk profile.
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.
