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During the third quarter of 2023, the LOM Equity Growth Fund fell 3.14% as markets began to discount a softer global economy and a higher-for-longer interest rate narrative.
Global economic growth slowed in Q3 amidst high inflation and rising interest rates. Yet despite these drags, some parts of the global economy remained resilient, albeit broadly uneven across regions and sectors. On the positive side, inflation, although still elevated in many major economies, appears to have leveled off and interest rates appear to be close to peaking. However, challenges remain. For example, China is falling below growth expectations after reopening.
In the U.S., economic growth came in stronger than expected in Q3, improving the chances of a soft landing in the near term. However, there is a growing consensus that the fourth quarter could be more challenging due to the lagged impact of tighter of monetary policy, the return of student debt servicing in October and the automotive workers strike which could be prolonged. Also, soaring oil and gas prices could further pressure economic growth.
Markets are focused on inflation and central bank policy as we draw closer to inflation targets. Production limits set by OPEC+ are impacting the market as these oil producers expect less demand. With crude oil prices approaching $90, the worst may be behind us. Core inflation, which excludes food and energy price fluctuations, dropped from 4.83% to 4.35% in the third quarter.
In Q3, rising oil prices and lackluster corporate guidance contributed to global stock market declines. The S&P 500 decreased by 3.27%, while the MSCI World Index fell by 3.36%. In the U.S., the best-performing sectors were Energy (+12.22%), Communication Services (+3.07%), and Financials (-1.13%). Utilities (-9.25%), Real Estate (-8.90%), and Industrials (-5.16%) had the weakest results.
The LOM Equity Growth Fund continued to benefit on a relative basis from good stock selection in the Consumer Discretionary and Communication Services sectors. Looking ahead, we continue to focus on high-quality, wide moat issues in our security selection process.
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.
