Franklin Income SMA Q2 2025 Commentary

2025-07-30 19:25:00 ET

Key Takeaways

• Markets: US stocks advanced during the second quarter of 2025 as equity markets rebounded from April’s lows and continued to rally through June, despite bouts of volatility. Temporary delays in tariff hikes, reduced fears of a recession, growing expectations of interest-rate cuts later in the year and easing geopolitical tensions helped drive US stocks higher. Major US indexes fluctuated, but each posted positive returns by period-end.
• Contributors: Allocations to both the 1xed income and equity sides of the portfolio contributed to the fund’s absolute returns, while security selection and portfolio positioning assisted relative returns.
• Detractors: Stock selection and an underweight allocation to the industrials sector, as well as selection among health care companies, detracted from relative equity returns.
• Outlook: We remained selective among equities and added to high-quality names. Moreover, we reduced exposure to investment-grade corporate bonds and added to agency mortgage-backed securities to potentially enhance yield and diversi1cation.

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