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Innovative companies and small cap opportunity equities rallied in Q2 as markets rebounded from a sharp tariff-related selloff in early April.
Global equities rebounded sharply in Q2 2025, with the S&P 500 posting a 10.9% total return over the quarter, despite a swift -12.1% selloff from April 2 to April 8 following the “Liberation Day” tariff announcements. Markets quickly regained footing as resilient corporate earnings, rising expectations for Federal Reserve rate cuts and the postponement of tariff negotiation deadlines reignited investor optimism. The S&P 500 ended the quarter at a record high on June 30, completing one of the fastest market recoveries in history.
Market leadership remained concentrated, with mega-cap technology stocks once again propelling the S&P 500 index higher. The equal weighted S&P 500 index returned 5.5% over the quarter lagging the market weighted index. Sector performance was broadly positive with 8 of 11 GICS sectors finishing the quarter in the green. Information Technology and Communication Services led the rally returning 23.7% and 18.5%, respectively. Conversely, defensive sectors such as Energy and Healthcare underperformed the market declining -8.6% and -7.2%, respectively.
Global equities also advanced as investors sought diversification amid a declining dollar. The Dollar index fell -7.1%, providing a tailwind to international returns in USD terms. Major indices recorded gains: Europe’s Euro Stoxx 50 increased 4.9% in EUR and 12.2% in USD; Japan’s Nikkei 225 increased 13.8% in JPY and 18.3% in USD and UK’s FTSE 100 increased 3.2% in GBP and 9.6% in USD.
In terms of the Innovation fund positions, small value cap stocks, as measured by the Russell 2000 Value index rose 4.36% while the Innovation-centric NASDAQ index rose 17.75% during the period. The widely follow Ark Innovation Fund soared 66.52% as speculative fever gripped retail investors.
In this environment, we continue to favor innovative companies offering attractive growth prospects. Some our themes include the rapid adoption and deployment of artificial intelligence, cyber security, healthcare innovation and migration of data to the cloud. 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.
