We’ve reached that familiar moment of media buzz around the election. As expected, this time of year often brings extra attention and speculation, but we want to take a moment to reassure you about where things currently stand.
Despite a brief bout of market volatility in August, the markets have shown remarkable resilience. One significant development has been the Federal Reserve’s shift toward easing, starting with a notable 50-basis-point rate cut. This move has fostered a more supportive environment for corporate earnings, which have continued to grow at a strong pace. We expect this trend to be beneficial as we move into the year-end.
The markets have performed well this year, reflecting companies’ ability to adapt and deliver strong earnings in a changing economic environment. Historically, November and December have been strong months for the markets, and we’re cautiously optimistic about the potential for continued gains through the remainder of the year.
Corporate balance sheets remain robust, with record amounts of cash available. This liquidity acts as a solid buffer against potential downturns and supports further investments. While the broader market gains have been largely driven by the so-called “Magnificent 7” stocks, which are up over 40% year-to-date and now represent 36% of the S&P 500’s market cap (an all-time record), we’re also seeing a healthy broadening of the market. Our U.S. large-cap portfolio, for example, outperformed the S&P 500 in the third quarter. The adoption of AI is spreading across sectors, from industrials to pharmaceuticals and even agriculture—with John Deere’s autonomous harvesters now using Starlink satellite GPS for hands-free harvesting in the U.S.
We’ve recently added an innovative company to our portfolios: Visteon Corporation. Visteon is a leading automotive electronics supplier that is well-positioned to capitalize on trends like vehicle electrification and digitalization. Its advanced products, like digital instrument clusters and driver-assistance systems, align well with the increasing demand for high-tech automotive solutions.
As always, we remain committed to our disciplined, long-term investment approach, which we believe offers a structural advantage. While business cycle fluctuations often drive short-term market movements, longer-term returns are typically fueled by strong fundamentals. By identifying profitable companies trading at a discount to their typical price-value relationships, we aim to provide a margin of safety that helps protect your portfolios and capitalize on growth opportunities over time.
In summary, we’ve seen a strong third quarter, supported by resilient earnings, favorable monetary policy, and strong corporate fundamentals. As we head toward the close of the year, we expect continued momentum while also remaining vigilant about potential risks and staying focused on managing your portfolios prudently.
Thank you, as always, for your trust. If you have any questions or concerns, please don’t hesitate to reach out.
