During the 3rd Quarter, the stock market shifted drastically away from Technology companies towards “Everything Else.” This welcome change was overdue and expected and as it became evident over the past couple of months that growth was slowing due to historically tight interest rate policy, investors gravitated toward higher Quality issues that can withstand a more stringent economic environment. As a result, Carderock stocks gained 8.1% on average for the quarter, with the S&P 500 market-cap weighted Index up 5.9%.

Up to this point, future growth expectations have been narrowly focused on a few large companies’ investments in Artificial Intelligence (AI) hardware, and the implied subsequent productivity gains and transformative effect it will have on the economy. Many parts of the industrial economy that play a role in developing AI have benefited as well, particularly those involved in the maintenance of power distribution networks, datacenters and utility infrastructure that have received tax credits due to recent legislation. In moving forward, we expect the rotation towards Quality companies to continue the 3rd Quarter results into the New Year as the market broadens its view and recognizes these relative opportunities.