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.

August was shaped by two global forces: new U.S. tariffs and shifting investor flows. The tariff package altered trade expectations and corporate guidance across supply-chain-heavy sectors. Flows swung through the month—early equity outflows on tariff headlines, a mid-month rebound as softer U.S. data hinted that tightening cycles were near an end.

In August, sector narratives were shaped by tariffs, macroeconomic indicators, earnings revisions, and interest rate developments. Overall, the tariff landscape tightened as several actions taken earlier in the summer resulted in a higher effective tariff burden by early August.

July was a telling month for global investors, as regional divergences in central bank policy and underlying economic momentum became increasingly impactful on relative currency moves. The U.S. dollar reached its trough on July 1, and the subsequent rally into the end of the month reduced international equity returns (in U.S. dollar terms).

July began with the index reaching record highs, bolstered by strong earnings expectations and optimism surrounding trade negotiations. However, caution emerged as market breadth and participation indicators diverged from price gains, hinting at the potential for increased volatility.

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.

Global equities performed well in June, driven by a confluence of dovish central bank policies, divergent economic releases, and gyrating trade dynamics in the U.S., China, the Eurozone, Canada, Japan, and the Pacific region.

In June, the U.S. fixed income market navigated a complex landscape shaped by Treasury auctions, Federal Reserve commentary, and mixed inflation signals. Treasury yields experienced volatility but trended downward, with the 10-year Treasury yield closing at 4.235% on June 30, after peaking at 4.51% earlier in the month.

In June, the S&P 500 saw a significant increase of about 4.96%, marking its third-consecutive monthly gain after a challenging spring of policy shocks in April. This surge was fueled by supportive corporate earnings, decreasing volatility, and a normalization of trade tensions. Year-to-date, the index had risen approximately 5.5%, with a 12-month increase of more than 13.6%.

The 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 markets exhibited varied performance in May, driven by divergent macroeconomic factors, dashed expectations of more dovish Federal Reserve policy, and sector-specific dynamics. Performance ranged from weakness in U.S. sovereigns to outperformance in emerging market bonds.

During May, global equity markets exhibited mixed results across key regions. These shifts were largely influenced by a weakening U.S. dollar, changes in central bank policies, and ongoing geopolitical developments. The U.S. Dollar Index (DXY) declined by 8.13% year-to-date.

In May, the S&P 500 experienced a remarkable surge of 6.15%, marking its best performance for the month since 1990. This rally was driven by a combination of strong corporate earnings, declining inflation, easing trade tensions, and robust economic indicators.

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.

Given the massive swings in the market last month, it may surprise you to learn that the S&P 500 was down only -0.68% for the month. Perhaps more surprising is that the Nasdaq Composite was up 0.85%. Internationally, Japan, Germany, and Canada were also up (0.37%, 2.17%, and 0.15%, respectively). Fixed income also increased, with the Barclays Capital Aggregate Bonds Total Return up 0.42%.

In last month’s letter, we concluded, “In summary, the market’s trajectory remains largely influenced by trade tensions, mixed economic indicators, and shifting investor sentiment. While some analysts express optimism regarding potential economic boosts from deregulation and tax policies, the current climate of uncertainty poses significant risks for market stability and growth.”

In April, the U.S. and global fixed income markets experienced a complex interplay that shaped investor sentiment and asset performance. On the positive side, a noticeable easing in tariff-related tensions and the improvement of trade rhetoric marked a significant shift in the U.S. trade landscape.

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.