The Smart Core Equity Portfolio is designed to invest in companies that we believe have the potential to deliver excess returns through positive economic profitability, solid balance sheets (quality), meaningful cash generation (profitability), and trading at considerable margins of safety (valuation). We believe these factors will continue to provide rational opportunities for the foreseeable future.

International equities broadly outpaced U.S. stocks in January, with markets outside the U.S. advancing at a stronger relative pace than major U.S. benchmarks. Developed foreign markets in Europe and the Pacific generally saw more pronounced gains, while emerging markets also started the year strongly, benefiting from a softer dollar and global diversification flows.

Entering February, global fixed-income markets are navigating a "mid-to-late-cycle" environment characterized by a transition from aggressive policy easing to a more measured, data-dependent approach. For U.S. investors, the primary narrative is the bear steepening of the yield curve.

U.S. equities entered 2026 with a mixed but generally constructive tone, and beneath a relatively calm headline index, the 11 cap-weighted S&P 500 sectors told a story of rotation rather than runaway risk‑on. Technology and Communication Services remained in the spotlight as investors continued to bet on artificial intelligence and cloud infrastructure, but leadership was less one-sided than in 2025.

The DH Smart Value Portfolio is designed to invest in companies that we believe have the potential to deliver excess returns through positive economic profitability, solid balance sheets (quality), meaningful cash generation (profitability), and trading at considerable margins of safety (valuation).

As of the end of December 2025, the U.S. economic outlook is mixed but remains broadly stable. Growth indicators have softened, but underlying activity has shown resilience amid ongoing macro pressures, including slowing labor momentum and uneven consumer demand.

In December, global equity markets displayed a coordinated year-end rally, driven by the finalization of central bank pivots and "window dressing" by institutional investors. Unlike the divergence seen in November, developed markets largely moved in tandem, buoyed by liquidity injections and clarity in 2026 monetary policy paths.

Global fixed income markets shifted decisively in December, driven by the synchronized dovish pivot of Western central banks. The dominant theme was the "bull steepening" of yield curves in developed markets—a scenario in which short-term interest rates fall faster than long-term rates, steepening the yield curve.

In November, global equity performance diverged across developed markets, driven by varying domestic macroeconomic conditions and central bank policies. 

In November, global fixed-income markets saw modest gains, with bond prices generally rising and yields falling in response to continued central bank rate cuts. For instance, the Bloomberg US Aggregate Bond Index gained 0.6% as the 10-year Treasury yield dropped from 4.16% to 4.11%.

As of December 1, 2025, the U.S. economic outlook remains cautiously optimistic, with a "soft landing" viewed as the most probable scenario. The economy is demonstrating resilience despite headwinds like higher tariffs and a record-long government shutdown in the fall, which slightly dampened Q4 growth estimates.

The DH Smart Value Portfolio continues to invest in companies that deliver excess returns through strong economic profitability, solid balance sheets (quality), significant cash generation (profitability), and trading at considerable margins of safety (valuation). We believe these factors will continue to provide rational opportunities for the foreseeable future.

In October, global bond markets experienced modest yield declines, though total returns were uneven across regions. The Bloomberg Global Aggregate Bond Index fell roughly 0.3% as elevated global issuance and stretched valuations weighed on returns.

Global equity markets in October reflected a mix of optimism and caution. Strong corporate earnings, particularly in the technology sector, and expectations of monetary easing improved investor sentiment. Equity funds experienced significant inflows in early October, the highest in nearly a year, as weaker U.S. inflation and a disappointing jobs report raised hopes for Federal Reserve rate cuts.

November was a telling month. For the bullish camp: the Federal Reserve cut rates in late October and reaffirmed its easing intentions, which helped risk assets; corporate earnings remained resilient across many sectors; and, despite uncertainty, the economy still showed durability.

The DH Smart Value Portfolio continues to invest in companies producing excess returns through positive economic profitability, supported by solid balance sheets (quality), significant cash generation (profitability), and trading with considerable margins of safety (valuation). We believe these factors will continue to provide rational opportunities for the foreseeable future.

Fixed income returns in September were driven by a potent intersection of monetary policy shifts, abundant supply, and evolving risk premiums across sectors. The net result was generally lower yields worldwide.

During September, global equity markets advanced on the back of dovish central bank shifts, resilient corporate earnings, and a rotation into regions beyond the U.S. In the U.S., the S&P 500 and Nasdaq recorded their strongest September gains in 15 years propelled by a fully priced-in 25 bp Fed cut and optimism for further easing.

September was an interesting month. Whether you were bullish or bearish, there was data to support your stance. For example, expectations of eventual Fed rate cuts, steadier corporate earnings, and resilient demand supported upside momentum.

The DH Smart Value Portfolio continues to invest in companies producing excess returns through positive economic profitability, supported by solid balance sheets (quality), significant cash generation (profitability), and trading with considerable margins of safety (valuation). We believe these factors will continue to provide rational opportunities for the foreseeable future.