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Many of our fast-growing, innovative companies performed well over the first half of 2024 as markets sustained this year’s momentum on optimism over America’s economic resilience and the potential for more accommodative monetary policies from the world’s central banks. For the first half of 2024, the LOM Innovation and Opportunity Fund rose by 10.20% and for the one-year period ended June 28, the fund posted an increase of 19.77%.
The global economy continued its surprising resilience during Q2, despite the impact of significant central bank monetary tightening policies implemented over the past two years. In the US, real gross domestic product (GDP) increased at an annual rate of 1.3 percent in the first quarter of 2024, as reported by the Bureau of Economic Analysis at the end of May. While growth remains positive, this marks a deceleration from the fourth quarter of 2023 when real GDP increased by 3.4 percent.
The increase in real GDP reflected higher, but decelerating consumer spending, along with increased residential fixed investment, nonresidential fixed investment, and state and local government spending. However, this was offset by a decrease in private inventory investment. Imports, which are subtracted in the GDP calculation, increased.
Signs that higher interest rates are weighing on the consumer could be seen in the housing and building permit report for the month of May. May building permits were at a seasonally adjusted annual rate of 1,386,000 which is 3.8 percent below the revised April rate of 1,440,000 and 9.5 percent below the May 2023 rate of 1,532,000. Permits are a leading indicator of housing starts and therefore this data predicts less property development and associated jobs over the next few months.
In the equity markets, relatively strong Q1 corporate earnings reports combined with marginally less restrictive central bank policies pushed the major averages to new highs once again. The S&P 500 gained 3.92% in the first quarter while the MSCI World Stock index advanced by 2.18%. Performance by sector continued to show dispersion, with Information Technology (+11.47%), Communications (+8.17%) and Utilities (+3.52%) showing the best returns, while Real Estate (-3.12%) and Materials (-3.12%) lagged. Non-US markets underperformed America’s benchmarks with the Eurostoxx 50 falling 3.73% and Japan gaining just 2.05%. Higher dividend-paying companies were also shunned during the quarter with the Dow Jones Dividend Select Index falling 1.01%.
In this environment, we continue to favor innovative companies which offer attractive growth prospects in an increasingly challenged macro environment. Meanwhile, our small cap value selection process continues to find overlooked and underappreciated opportunities across several key market sectors.
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.
