With continuing economic tailwinds driven in part by robust consumer spending in the housing, leisure and electronics sectors, the US equity market continued its slow and steady upward climb in the second quarter achieving new all-time highs.
As of June 30, the S&P 500 Index has risen 1.2% in 2015 and the NASDAQ composite advanced 5.2%.
Healthcare and consumer discretionary stocks have led the market.
The consumer is benefiting from an economy which continues to expand, increasing wages due to lower unemployment and an improving labor market.
At the same time, lower energy prices and a strong dollar making foreign goods more affordable.
Small capitalization stocks have outpaced large capitalization stocks during the past six months.
The Redwood US Equity Large Cap Core portfolio strives to build a portfolio of companies demonstrating positive estimate revisions, attractive valuation and high quality characteristics.
Consistent with the investment process, the majority of the excess return was driven by stock selection, which accounted for over 90% of the excess return.
Stocks in the information technology and financial sectors accounted for over half of excess return driven by strong stock selection.
Energy was the largest negative contributor during the quarter, thanks to a myriad of global issues such as rising inventories, lagging demand, economic slowdown in China and a strengthening of the US dollar.
During the second quarter, Redwood increased our exposure to energy but still remained underweighted the sector.