During the third quarter, the global equity landscape presented a mixed picture, as the initial surge of optimism observed in European markets earlier in the year started to recede. Concurrently, a noticeable shift occurred in market leadership, with international value stocks outperforming their growth counterparts, a trend largely influenced by an environment of increasing bond yields.
The portfolio's performance during this period generally aligned with its core MSCI EAFE benchmark, despite facing some headwinds stemming from its strategic allocations within the financial sector. In response to evolving market dynamics, significant adjustments were made to enhance exposure to artificial intelligence, highlighted by investments in Celestica, a Canadian cloud provider, and SoftBank, a Japanese investment holding company with interests in OpenAI. Furthermore, the portfolio saw increased allocations to emerging markets, particularly China, driven by a perception of its readiness for growth in areas such as AI, technology, and a self-sufficient healthcare system. This strategic pivot aligns with broader macroeconomic shifts, including a depreciating U.S. dollar, which is beginning to create a more favorable environment for companies operating outside the United States.
The ongoing adjustments reflect a proactive approach to navigating a complex global financial environment, aiming to capitalize on emerging opportunities and mitigate risks. The focus on AI and strategic emerging market investments underscores a belief in their long-term growth potential, suggesting a forward-looking strategy that seeks to harness innovation and global economic rebalancing for sustainable returns.