LOM Stable Income Fund Manager’s Report Q3 2020

Global risk markets continued to rebound during the third quarter of 2020 as the economic recovery gained traction on the back of unprecedented fiscal and monetary stimulus. Over Q3 the LOM Stable Income Fund achieved a total return of 7.22%, outperforming its benchmark by 1.87%

Global activity as measured by home sales, industrial production and aggregate employment levels continued to show signs of improvement throughout the third quarter. Near-term sequential progress continued to rise when coronavirus-related restrictions on routine activities were lifted. On a global basis, China appears to be somewhat ahead of most major economies due to its earlier shutdown and reopening. While the worst of the recession appears to have passed for the U.S. and Europe, activity levels remain below full potential while several pharmaceutical companies work diligently on a vaccine.

When the U.S. economy began reopening in April, consumer sentiment began to improve significantly. This trend typically begins during recessions and lasts into the early cycle phase. Industries most directly impacted by the virus, such as travel, leisure, restaurants, and hotels, accounting for roughly 20% of U.S. jobs and economic output—may remain difficult to fully reopen until a vaccine is approved and widely distributed. Meanwhile daily Covid-19 related deaths continue to fall in most countries as the virus runs its course and medical professionals learn to deal with the disease more effectively.

Despite a correction in September, the global dividend-paying stocks ended the quarter higher, helped by stronger earnings revisions, a weaker dollar and low bond yields. Quality stocks edged out Growth stocks in Q3 and in September too. While high dividend-paying stocks, as measured by the Dow Jones Dividend Select index underperformed the growth heavy S&P 500 and MSCI World stock indices, dividend achievers, or those companies with long histories of raising dividends fared remarkably well.

The Dividend Achiever Select Index, as represented by our exchange-traded fund position, the Vanguard Dividend Appreciation index outperformed all benchmarks and the broader indices by returning 13.50% for the period. VIG remains our largest ETF position within the fund.

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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.