Hedged Income Fund Commentary
The stock market marched higher during the second quarter, up more than 8%. Under the hood, though, sector leadership differed from what was seen during the first quarter of 2021. Investors have become increasingly convinced that near-term inflation data represent transitory shocks rather than a rising structural tide of higher prices. As a result, the yield on the 10-year Treasury note declined roughly 30 basis points (0.30%) during the quarter, ending below 1.50%. This was particularly beneficial for technology and communication services stocks, which outperformed the S&P 500 Index during the quarter after a rough start to the year. Cyclical stocks, except energy, took a breather during the quarter after several quarters of outperforming the broader market indexes.
Positioning the Hedged Income Fund
Portfolio composition is subject to change.
We believe the current early-to-mid cycle state of the economy argues for continuing to own cyclical stocks over defensive ones. Although the rate of positive change for economic data has likely peaked with the anniversary of the U.S. COVID-19 recovery - aiding year-to-year comparisons until now - we believe data can remain highly positive for the near future. As such, we are focused on the materials, discretionary, and industrial sectors of the equity market.
Why Should Investors Consider Investing in This Fund?
With interest rates being kept historically low, income is harder for investors to come by. This Fund seeks to offer a low-volatility solution with some exposure to the equity market. As a result, it can provide the opportunity to earn income without a great deal of exposure to risk.
The S&P 500 Index is regarded as a gauge of the U.S. equities market. This index includes 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 focuses on the large-cap segment of the market, with approximately 75% coverage of U.S. equities, it is also an ideal proxy for the total market. This index is unmanaged and does not reflect the deduction of the expenses associated with a mutual fund, such as investment management and fund accounting fees. The Fund’s performance reflects the deduction of fees for these services, but does not reflect he deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Investors cannot invest directly in an index.