Insights & Resources

This month, we asked one of our portfolio management teams, Wellington Management, to provide their insights into the markets and to explain how their portfolio is positioned.

Outlook

The U.S. equity markets continue to have narrow leadership this year. For context, in 2Q, markets reached new highs, driven by a narrow set of names, with particularly strong contributions from technology and AIrelated companies. In fact, Nvidia and Apple combined contributed approximately 60% of the Russell 1000 Growth Index’s return during the quarter. From a sector perspective, information technology, communication services, and utilities were the strongest areas of the market, as investors optimistically engaged with the build-out of more AI-related infrastructure across the economy. Sectors including materials, industrials, financials, and real estate were all negative during the period as earnings results and macro data, outside of demand in certain parts of technology, reflected a relatively muted economic environment. Continued pressure on U.S. consumers led to uneven demand trends in consumption parts of the economy as depleted savings and continued debt service costs weighed on overall spending. Inflation remained reasonably contained, but equity markets grappled with a potentially more patient Fed as core inflation measures remained above the Fed’s stated target. In 3Q, the focus remains on Fed policy and a potential rate cut in September. As the 2024 U.S. election cycle comes into focus, policy positioning regarding fiscal deficits, tax policy, and trade are likely to be more relevant to financial markets in the second half of 2024. We expect policy headlines and the continued focus on the pace and magnitude of Fed rate cuts to create volatility. Amid this volatility, we believe the continued focus on company earnings in the latter half of the year, specifically within the leadership sectors like information technology, should create an opportunity for more differentiation within the narrow market.

Positioning

As a reminder, U.S. Equity Growth is a diversified portfolio where our efforts are focused on stock selection. Given our focus on stock selection being the central driver of portfolio returns, we’ve found more individual opportunities in broader parts of the market outside of technology including holdings in healthcare, industrials, and real estate. We also remain watchful for broadening implications of the significant AI-driven capital investment cycle as a range of industries start to potentially see productivity benefits from these innovations. As noted above, we are monitoring the dynamics of the presidential race, Fed policy, and company earnings, as near-term volatility may create potential opportunities over our long-term investment horizon. As of July 31, 2024, some of our largest active weight holdings in the portfolio versus the Russell 1000 Growth Index are Alphabet, Broadcom Inc, and Mastercard. We highlight commentary on each below:

• Alphabet, a multinational technology conglomerate, reported a strong first-quarter earnings beat with revenue increasing 15% year-over-year, the fastest rate of growth since early 2022, driven by strength in YouTube advertising and Cloud services. The company also announced its first-ever dividend and a $70 billion share repurchase program. While the stock has come under recent pressure with the technology sector and uncertainty over ongoing antitrust concerns from the U.S. Department of Justice, we continue to see the potential for generative AI capabilities to drive revenue growth and expand margins for Google Cloud and remain overweight on the position.
• Broadcom Inc is a multinational designer, developer, manufacturer, and global supplier of a wide range of semiconductor and infrastructure software products. We believe the company is attractively levered to the cloud data center investment cycle (including sales tied directly to AI build-outs) and is a clear leader in foundational connectivity chips and leading-edge custom silicon that are in high demand due to the explosive growth of increasingly complex data traffic and the resultant networking bottleneck. Additionally, we like their exposure to AI through ASICs (a form of compute acceleration) coupled with the growth rate of their merchant networking products which should create a runway for Broadcom to continue to increase shareholder value.
• Mastercard, the global payments company, fell during 2Q despite reporting strong 1Q24 results that showed revenue and EPS beat consensus estimates. Also, a federal judge rejected a $30 billion antitrust settlement involving Mastercard and other merchants over credit card swipe fees, stating that the credit card giants could withstand a greater judgment. This may lead merchants to negotiate a more favorable settlement for themselves or proceed to trial. We continue to have a positive view on Mastercard as a strong operator and share gainer from competitors.

Disclaimers

This document is intended solely for information purposes. It is not a sales prospectus, nor should it be construed as an offer or an invitation to take part in an offer.The opinions expressed in the communication are solely those of the author(s) and are not to be used or construed as investment advice or as an endorsement or recommendation of any entity or security discussed. This report may contain forward-looking statements about one or more pools, future performance, strategies or prospects, and possible future fund action. These statements reflect the portfolio managers’ current beliefs and are based on information currently available to them. Forward-looking statements are not guarantees of future performance. We caution you not to place undue reliance on these statements as a number of factors could cause actual events or results to differ materially from those expressed in any forward-looking statement, including economic, political and market changes and other developments. Every effort has been made to ensure that the material contained herein is accurate at the time of publication. Market conditions may change which may impact the information contained in this document and it is subject to change without notice. The author and/or a member of their immediate family may hold specific holdings/securities discussed in this document. Any opinion or information provided are solely those of the author and does not constitute investment advice or an endorsement or recommendation of any entity or security discussed or provided by CI Global Asset Management. We cannot guarantee its accuracy or completeness and we accept no responsibility for any loss arising from any use of or reliance on the information contained herein. The pools used in the CI Private Wealth portfolios are managed by CI Global Asset Management. Management fees and expenses may all be associated with investments in the CI Private Wealth portfolios and the use of other services. The pools used in the CI Private Wealth portfolios are not guaranteed, their values change frequently, and past performance may not be repeated. You should seek professional advice before acting on the basis of information herein. CI GAM | Multi-Asset Management is a division of CI Global Asset Management. CI Global Asset Management is a registered business name of CI Investments Inc. This report may not be reproduced, in whole or in part, in any manner whatsoever, without prior written permission of CI Private Wealth. © 2024 CI Private Wealth, a division of CI Private Counsel LP. All rights reserved. (09/24)