A rules-based strategy designed to exploit market inefficiencies in a disciplined systematic manner.
Current strategy and outlook
U.S. stocks advanced during the second quarter on continued strength in the labor market and in several key economic measures. The S&P 500 Index rose by 4.28% during the quarter and the Nasdaq Composite grew by 8.26%. The information technology and communication services sectors led, while energy and materials lagged. Large-cap stocks outperformed small caps and growth significantly beat value. The Federal Open Market Committee held interest rates steady throughout the quarter and is now expected to cut rates only once in 2024. While Fed Chair Powell acknowledged modest progress on taming inflation at the central bank’s June meeting, he emphasized the need for more confidence about the inflation situation before making any changes to rates.
U.S. bond performance was essentially flat during the quarter. The Bloomberg U.S. Aggregate Bond Index inched up 0.07%, and the 10-year U.S. Treasury yield rose from 4.33% at the start of April to 4.36% by quarter end.
The resilience of the U.S. economy persists. Despite the effects from continued monetary tightness, economic growth remains strong, driven by gains in payrolls and productivity. Consumer spending is stable, supported by a significant increase in household net worth. However, consumer confidence remains below average due to the lasting impact of higher prices. While inflation has fallen to more manageable levels, concerns about overheating persist. While core inflation has declined for 14 consecutive months, core services prices are still rising. A downshift in growth and loosening of the labor market may be necessary to maintain inflation near the Fed’s 2% target. This does not imply significant economic weakness, but it may keep rates higher for longer than expected.
Strong earnings momentum — which could continue through the year — has supported U.S. stocks. The growth and quality of earnings have justified expensive stock valuations, particularly in mega-cap technology stocks. However, we expect the rally to broaden, with value-oriented and smaller cap segments taking the lead. The economic soft landing and anticipated rate cuts should create favorable conditions for U.S. stocks, despite potential near-term pullbacks.
Portfolio Review
Over the reporting period, the stock selection in the utilities sector contributed the most to performance. Secondarily, selection was strong in the industrials sector, but this was mitigated by a negative impact from the relative overweight. At the individual stock level, overweight positions in 3M Co. and QUALCOMM Inc. as well as the underweight in Berkshire Hathaway Inc. are among the key contributors.
By contrast, stock selection and the underweight in the information technology sector detracted. Selection in the health care sector was also negative, but to a smaller degree. Among the largest individual detractors for the period were the underweight positions in NVIDIA Corp. and Apple Inc., as well as not owning Alphabet Inc.
As of the end of the reporting period, the Fund’s largest sector overweight was to the financials sector, while the largest sector underweight was information technology. Sector exposures are purely a function of the strategy’s rules-based investment discipline and are not actively managed.
Holdings Detail
Companies mentioned in this report – percentage of Fund investments, as of 06/30/24: 3M Co. 0.99%, QUALCOMM Inc. 1.19%, Berkshire Hathaway Inc. 0.99%, NVIDIA Corp. 1.38%, Apple Inc. 1.23% and Alphabet Inc. 0%; 0% indicates that the security is no longer in the Fund. Portfolio holdings are subject to daily change.
Key Takeaways
For the quarter ended June 30, 2024, the Voya Corporate Leaders 100 Fund underperformed its benchmark, the S&P 500 Index (the Index) on a net asset value (NAV) basis.
During the quarter, the Fund continued to follow its strict rules-based investment approach.
At the beginning of the quarter, the Fund held equal-weighted positions in the stocks of the S&P 100 Index (implying that each holding represented about 1% of the portfolio).
Over the course of the quarter, if the value of a security increased by more than 50%,* the position size was reduced to 1%, and if the value of a security decreased by more than 30%,* the position was eliminated.