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Despite a challenging summer for higher-yielding equities and preferred securities, the Stable Income Fund posted a positive total return over the past year and has delivered a net annualized total return of 7.07% over the past three years. During the third quarter, both dividend-paying stocks and $25 par securities declined sharply as longer-term interest rates rose.
The Middle East conflict again defined the quarter as hopes for a lasting U.S.-Iran agreement faded. Shipping through the Strait of Hormuz remained well below pre-conflict levels, and hostilities escalated in September as the United States and Iran exchanged strikes and Iran-aligned militants attacked Saudi energy facilities. West Texas Intermediate crude rebounded from its second-quarter lows to end the quarter above $90 per barrel, and elevated energy costs kept inflation high, with the PCE price index rising 3.4% over the 12 months to August.
The global economy has nonetheless proven resilient. In its September outlook, the OECD modestly raised its 2026 global growth forecast to 2.9%, with the United States at 2.2% and the eurozone at roughly 1%, reflecting the greater exposure of Europe and much of Asia to imported energy. Inflation, however, is expected to remain elevated, with G20 inflation projected at 4.1% this year, and the OECD cautioned that the buffers absorbing the shock are diminishing.
In fixed income markets, the much-anticipated rate hike materialized in September. Following a hawkish Jackson Hole address by Fed Chair Kevin Warsh, the Federal Reserve voted unanimously to raise the federal funds rate by 25 bps to a range of 3.75% to 4.00%, its first increase since 2023, with most officials expecting another hike before year-end. Persistent inflation, higher oil prices, large fiscal deficits, and heavy AI-related corporate borrowing pushed the 10-year Treasury yield to nearly 5.3%, its highest level since 2007, and the 30-year yield above 5.6%.
Dividend-paying stocks struggled in this environment. The Dow Jones Global Dividend Select Index fell 1.83% during the quarter, compared with a 1.60% gain in the MSCI World Index.
At quarter end, the Fund was allocated approximately 40% to hybrid securities (including preferred stock and baby bonds), 49% to dividend-paying equities, and 11% to higher-yielding fixed income. Based on the monthly distribution of $0.035 per unit, the Fund’s current dividend yield was 3.60% at quarter end.
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.
