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Over the past year, the LOM Stable Income Fund achieved a net total return of +9.01%, inclusive
of a modest +1.18% gain in Q1. During the latest quarter, strong performance from high dividend paying
stocks was offset by hybrid securities which were negatively impacted by higher long-term
interest rates and rising credit spreads.
Global economic performance in Q1 2026 was characterized by a sharp shift from cautious
optimism to heightened uncertainty, driven largely by the outbreak of the Iran war in late February.
Prior to the conflict, economic growth expectations were modest but stable. However, the war
quickly triggered a significant energy shock, with oil prices rising into the $110–$120 range amid
disruptions to the Strait of Hormuz, a critical artery for approximately 20% of global oil supply.
The increase in energy prices fed directly into inflation expectations, tightened financial conditions,
and weakened consumer and business confidence. Equity markets reflected this shift: European
and Asian indices posted meaningful declines, while U.S. markets proved comparatively resilient,
supported by domestic energy production and continued earnings strength in select sectors.
The primary transmission channels from the Iran war to the broader economy have been energy
and supply chains, with higher fuel costs cascading into transportation, manufacturing, and food
prices, thereby reinforcing global inflationary pressures. This has complicated central bank policy
by delaying anticipated rate cuts and increasing the likelihood of a prolonged higher interest rate
environment, while also exposing vulnerabilities in emerging markets dependent on imported
energy. At the same time, the impact has been uneven: the United States has remained relatively
insulated, whereas Europe and parts of Asia have experienced greater economic strain due to
higher energy dependence.
Despite the sell-off in the major indices, higher dividend paying stocks fared well with the Dow
Jones Global Dividend Select Index advancing by +3.70% compared to a -3.88% decline in MSCI
World Stock index.
At quarter end, the Fund was allocated approximately 45% to hybrid securities (including preferred
stock and baby bonds), 44% in dividend-paying equities and 10% higher yielding fixed income. The
current dividend yield on the Fund was 3.55% at quarter-end based on the monthly unit payout of
$0.035.
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.
