Hi, I’m Nick Puncer, Portfolio Manager and member of Bahl & Gaynor’s Investment Committee. Today is Friday, March 7, 2025, so we are more than 2/3 of the way through the first quarter, and we wanted to provide investors with our thoughts about the year to date and outlook.

The quarter started with optimism regarding economic growth, which is understandable given the strong economic profile of the last two years and the substantial equity returns this fact pattern has supported.

But challenges have mounted, including:

These factors have not yet significantly affected growth, inflation, or other economic variables, but policy volatility has weighed on investor sentiment. This can eventually impact investment decisions and promote elevated volatility in equity markets.

Friday, February 21, seemed to be the first day of market action reflecting the emergence of a “growth scare”:

Our Investment Committee views these periods of elevated volatility as opportunistic because they generally produce investor over-reactions, which can lead to assets becoming mis-priced:

Taking a step back in terms of market outlook, we believe the last two years of healthy equity returns were largely driven by the upside surprise of avoiding recession. We suspect the avoidance of recession was a base case expectation for investors entering this year, which is partly evidenced by equity index targets published by the Street to begin the year that were largely ahead of levels achieved by the end of 2024.

All of this is to say that continued disruption to the narrative of a “no recession scenario” could sustain volatility like what we are seeing now.

To manage this risk, we focus on owning reasonably priced assets, with a low-volatility source of return in the form of dividends and dividend growth, and underlying business models capable of compounding throughout economic cycles.

We do think that active management possesses an advantage of choosing risk exposures in a volatile environment, and we do see ample opportunity for our style of investing to add value across the market cap range.

On that note, we will conclude by inviting you to review two recent and brief white paper publications: “Big Reasons to Think Small – Volume 2,” and “Market Concentration: At the Tipping Point?” on our website under the Insights tab.

The first publication outlines the opportunity for owning dividend growth equities in the small and mid-cap space.

The second paper takes a historical view of concentration and diversification cycles in equity markets and the distinctly different return profiles in each of these regimes.

Thank you for your time in listening today, and please do not hesitate to reach out to us through your local Institutional Portfolio Consultant, our website, or by telephone. We look forward to serving you.

Disclosure:

The views expressed in this update are those of the speaker and may not reflect the views of Bahl & Gaynor. Market conditions can change rapidly, and past performance is not indicative of future results.

Before making any investment decisions, please consult with a qualified financial professional to ensure the information is appropriate for your individual circumstances.

Bahl & Gaynor is a registered investment adviser with the Securities and Exchange Commission (SEC), and all discussions in this update are subject to the firm’s disclosure documents, including Form ADV Part 2A and Part 2B, which are available upon request.

This is not an offer to buy or sell any securities or investments. Any examples or information related to specific securities are for educational purposes and should not be considered a solicitation or recommendation.