Lazard's Q2 2024 Portfolio Commentaries: A Comprehensive Look at Global Market Trends

Lazard Retirement Emerging Markets Equity Portfolio Q2 2024 Commentary

The global economic environment remains balanced, providing a positive backdrop for emerging markets equities barring significant exogenous risks. Boosted by ongoing investor excitement over artificial intelligence, equity markets in the developing world, as measured by the MSCI Emerging Markets Index, rose 5.0% in the second quarter. Emerging Asia dramatically outperformed the broader market index, rising 7.4%. Eastern Europe also performed well, climbing 6.7%. Latin America had a more difficult time, tumbling 12.2%. Elections in India, South Africa, and Mexico all ended with some surprising results, affecting markets over the short term. Emerging Asia was the best-performing region in the period. Stock markets in Taiwan and Korea rose sharply, thanks to the ongoing frenzy over AI, which buoyed the information technology sector, the flagship industry for both countries. India's stock market surged after the country's election results despite a somewhat disappointing show by Prime Minister Narendra Modi. Indonesia's stock market slid on concerns about high interest rates and as the country gets acclimated to a new government. China's stock market advanced on positive sentiment about the country's improving economic outlook. Latin America was the worst-performing region. Mexico's stock market tumbled 16.1% in response to the results of the country's presidential election. Investors were concerned that the Morena Party's landslide win would allow it to claim a mandate to enact aggressive reforms. Stock markets in Colombia and Chile fell sharply, weighed down by the stock prices of raw materials producers. Brazil's stock market receded on political uncertainty that could adversely impact energy and retail companies. Peru's stock market finished the quarter modestly higher. The region encompassing emerging Europe, the Middle East, and Africa (EMEA) underperformed. Most stock markets in emerging Europe recorded gains, as some companies announced strong results. Turkey's stock market rose on positive sentiment about the country's more orthodox monetary policy. Greece's stock market fell modestly on profit-taking after a very strong period. Stock markets in the Gulf fell in sympathy with the fall in crude oil prices. South Africa's stock market surged after the country's election, which raised the possibility of a coalition government between the African National Congress and the pro-market Democratic Alliance (DA). Information technology, communication services, and utilities were the best-performing sectors in the quarter. Healthcare, consumer staples, and materials were the worst-performing sectors. (Index returns are measured net of taxes and in US dollar terms.) In the second quarter, the Emerging Markets Equity Retirement Portfolio (MUTF:RLEMX) advanced in absolute terms and outperformed its benchmark, the MSCI Emerging Markets Index. (Excess return is measured net of fees and in US dollar terms.) Stock selection in the materials and financials sectors boosted relative performance, as did stock selection in Korea, South Africa, and India. Higher-than-index exposure to South Africa contributed. Lower-than-index exposures to the materials sector and to Saudi Arabia were beneficial to relative performance. Shares of Taiwan Semiconductor Manufacturing Company (TSM, 5.0% weighting) gained on bullish sentiment about the Taiwan-based contract chipmaker's upside potential, thanks to potential price increases stemming from growing demand for the company's leading nodes. GALP (OTCPK:GLPEF, 1.0% weighting), a Portugal-based energy company with assets in Latin America and Africa, saw its stock price climb after announcing a sizeable oil discovery in Namibia. China-based lender China Construction Bank (CICHY, 3.0% weighting) saw its stock price climb on improved macroeconomic sentiment after the Chinese government announced stimulus measures for the country's beleaguered real estate sector. The rise in the stock price of India-based telecommunications company Indus Towers (2.4% weighting) was attributed to news of robust tower growth in the fourth quarter. Shares received an additional boost after the company's major customer, Vodafone Idea, successfully raised capital and provisions for bad debt were written back. Shares of Lenovo (OTCPK:LNVGY, 2.7% weighting) traded higher after the China-based personal computers and data center equipment manufacturer reported strong fourth quarter 2024 earnings. Shares were boosted further by optimism that PCs leveraged to artificial intelligence could help fuel a PC upgrade cycle. Stock selection in the consumer discretionary and industrials sectors undercut relative performance, as did stock selection in Chile and Taiwan. Higher-than-index exposure to the consumer staples sector and to Brazil and Mexico detracted. Lower-than-index exposure to the information technology sector and to India and Taiwan were detrimental to relative performance. Shares of Brazil-based lender Banco do Brasil (OTCPK:BDORY, 1.9% weighting) declined on concerns over persistent inflation and the country's heightened political risk. Mexico-based personal hygiene products maker Kimberly-Clark de Mexico (OTCPK:KCDMF, 0.8% weighting) saw its stock price fall on concerns about margin pressure stemming from rising costs. Shares came under additional pressure as part of a broader decline in the Mexican stock market due to worries about political risks. Indonesia-based lender Bank Mandiri (PPERF, 1.1% weighting) saw its stock price depreciate on expectations of ongoing pressure in net interest margin, a key measure of profitability, as funding competition keeps costs up. Shares of Vibra Energia (OTCPK:PETRY, 0.9% weighitng) faltered after the Brazil-based fuel distributor reported first-quarter results that indicated a decline in retail volumes. Shares of lender Banorte (OTCQX:GBOOY, 0.9% weighting) receded as part of a broader sell-off of Mexican stocks due to worries about political risks after the country's ruling leftist party won a larger-than-expected majority in congress. The team initiated positions in: Brazil-based oil and gas explorer PRIO (PTRRY, 1% weighting) on expectations that the company will increase production significantly over the next few years while its average lifting costs are projected to decline as its large Wahoo project is brought online. Peru-based lender Credicorp (BAP, 0.6% weighting) based on its upside earnings potential. The team believes that Yape, the bank's digital App and ecosystem that is redefining the customers' experience, will be a significant contributor to profitability going forward. The team divested from: UK-based miner Anglo American (OTCQX:AAUKF) after shares surpassed the team's price target following multiple acquisition offers from BHP. Taiwan-based contract electronics maker Hon Hai Precision (OTCPK:HNHAF) after the stock surpassed our price target on the back of market expectations that the company would benefit from the manufacturing of AI servers. China-based coal miner and power plant operator China Shenhua (OTCPK:CSUAY) due to low upsides to the price target after a period of strong performance in its shares. India-based metals miner Hindalco Industries after the recent stock price appreciation resulted in the price target being surpassed. China-based real estate developer China Vanke (OTCPK:CHVKF), as expectations for a property market recovery in China keep being pushed out. We believe that the unsynchronized global economic environment is resulting in a relatively balanced level of economic activity that is positive for equities. As long as this does not change or some significant exogenous risks appear, it should be a reasonably good backdrop for emerging markets equities. Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.

Lazard Emerging Markets Equity Portfolio Q2 2024 Commentary

New positions in PRIO and Credicorp were initiated, while Anglo American, Hon Hai Precision, China Shenhua, Hindalco Industries, and China Vanke were divested. Boosted by ongoing investor excitement over artificial intelligence, equity markets in the developing world, as measured by the MSCI Emerging Markets Index, rose 5.0% in the second quarter. Emerging Asia dramatically outperformed the broader market index, rising 7.4%. Eastern Europe also performed well, climbing 6.7%. Latin America had a more difficult time, tumbling 12.2%. Elections in India, South Africa, and Mexico all ended with some surprising results, affecting markets over the short term. Emerging Asia was the best-performing region in the period. Stock markets in Taiwan and Korea rose sharply, thanks to the ongoing frenzy over AI, which buoyed the information technology sector, the flagship industry for both countries. India's stock market surged after the country's election results despite a somewhat disappointing show by Prime Minister Narendra Modi. Indonesia's stock market slid on concerns about high interest rates and as the country gets acclimated to a new government. China's stock market advanced on positive sentiment about the country's improving economic outlook. Latin America was the worst-performing region. Mexico's stock market tumbled 16.1% in response to the results of the country's presidential election. Investors were concerned that the Morena Party's landslide win would allow it to claim a mandate to enact aggressive reforms. Stock markets in Colombia and Chile fell sharply, weighed down by the stock prices of raw materials producers. Brazil's stock market receded on political uncertainty that could adversely impact energy and retail companies. Peru's stock market finished the quarter modestly higher. The region encompassing emerging Europe, the Middle East, and Africa (EMEA) underperformed. Most stock markets in emerging Europe recorded gains, as some companies announced strong results. Turkey's stock market rose on positive sentiment about the country's more orthodox monetary policy. Greece's stock market fell modestly on profit-taking after a very strong period. Stock markets in the Gulf fell in sympathy with the fall in crude oil prices. South Africa's stock market surged after the country's election, which raised the possibility of a coalition government between the African National Congress and the pro-market Democratic Alliance (DA). Information technology, communication services, and utilities were the best-performing sectors in the quarter. Healthcare, consumer staples, and materials were the worst-performing sectors. (Index returns are measured net of taxes and in US dollar terms.) In the second quarter, the Emerging Markets Equity Portfolio (MUTF:LZEMX) advanced in absolute terms and outperformed its benchmark, the MSCI Emerging Markets Index. (Excess return is measured net of fees and in US dollar terms.) Stock selection in the materials and financials sectors boosted relative performance, as did stock selection in Korea, South Africa, and India. Higher-than-index exposure to South Africa contributed. Lower-than-index exposures to the materials sector and to Saudi Arabia were beneficial to relative performance. Shares of Taiwan Semiconductor Manufacturing Company (TSM, 5.0% weighting) gained on bullish sentiment about the Taiwan-based contract chipmaker's upside potential, thanks to potential price increases stemming from growing demand for the company's leading nodes. GALP (OTCPK:GLPEF, 1.0% weighting), a Portugal-based energy company with assets in Latin America and Africa, saw its stock price climb after announcing a sizeable oil discovery in Namibia. China-based lender China Construction Bank (OTCPK:CICHY, 3.0% weighting) saw its stock price climb on improved macroeconomic sentiment after the Chinese government announced stimulus measures for the country's beleaguered real estate sector. The rise in the stock price of India-based telecommunications company Indus Towers (2.4% weighting) was attributed to news of robust tower growth in the fourth quarter. Shares received an additional boost after the company's major customer, Vodafone Idea, successfully raised capital and provisions for bad debt were written back. Shares of Lenovo (OTCPK:LNVGY, 2.7% weighting) traded higher after the China-based personal computers and data center equipment manufacturer reported strong fourth quarter 2024 earnings. Shares were boosted further by optimism that PCs leveraged to artificial intelligence could help fuel a PC upgrade cycle. Stock selection in the consumer discretionary and industrials sectors undercut relative performance, as did stock selection in Chile and Taiwan. Higher-than-index exposure to the consumer staples sector and to Brazil and Mexico detracted. Lower-than-index exposure to the information technology sector and to India and Taiwan were detrimental to relative performance. Shares of Brazil-based lender Banco do Brasil (OTCPK:BDORY, 1.9% weighting) declined on concerns over persistent inflation and the country's heightened political risk. Mexico-based personal hygiene products maker Kimberly-Clark de Mexico (KCDMF, 0.8% weighting) saw its stock price fall on concerns about margin pressure stemming from rising costs. Shares came under additional pressure as part of a broader decline in the Mexican stock market due to worries about political risks. Indonesia-based lender Bank Mandiri (OTCPK:PPERF, 1.1% weighting) saw its stock price depreciate on expectations of ongoing pressure in net interest margin, a key measure of profitability, as funding competition keeps costs up. Shares of Vibra Energia (PETRY, 0.9% weighting faltered after the Brazil-based fuel distributor reported first-quarter results that indicated a decline in retail volumes. Shares of lender Banorte (OTCQX:GBOOY, 0.9% weighting) receded as part of a broader sell-off of Mexican stocks due to worries about political risks after the country's ruling leftist party won a larger-than-expected majority in congress. The team initiated positions in: Brazil-based oil and gas explorer PRIO (OTCPK:PTRRY, 0.1% weighting) on expectations that the company will increase production significantly over the next few years while its average lifting costs are projected to decline as its large Wahoo project is brought online. Peru-based lender Credicorp (BAP, 0.6% weighting) based on its upside earnings potential. The team believes that Yape, the bank's digital App and ecosystem that is redefining the customers' experience, will be a significant contributor to profitability going forward. The team divested from: UK-based miner Anglo American (OTCQX:AAUKF) after shares surpassed the team's price target following multiple acquisition offers from BHP. Taiwan-based contract electronics maker Hon Hai Precision (OTCPK:HNHAF) after the stock surpassed our price target on the back of market expectations that the company would benefit from the manufacturing of AI servers. China-based coal miner and power plant operator China Shenhua (OTCPK:CSUAY) due to low upsides to the price target after a period of strong performance in its shares. India-based metals miner Hindalco Industries after the recent stock price appreciation resulted in the price target being surpassed. China-based real estate developer China Vanke (OTCPK:CHVKF), as expectations for a property market recovery in China keep being pushed out. We believe that the unsynchronized global economic environment is resulting in a relatively balanced level of economic activity that is positive for equities. As long as this does not change or some significant exogenous risks appear, it should be a reasonably good backdrop for emerging markets equities. Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.

Lazard Emerging Markets Core Equity Portfolio Q2 2024 Commentary

The global economic environment appears balanced, providing a positive backdrop for emerging markets equities barring significant exogenous risks. Boosted by ongoing investor excitement over artificial intelligence, equity markets in the developing world, as measured by the MSCI Emerging Markets Index, rose 5.0% in the second quarter. Emerging Asia dramatically outperformed the broader market index, rising 7.4%. Eastern Europe also performed well, climbing 6.7%. Latin America had a more difficult time, tumbling 12.2%. Elections in India, South Africa, and Mexico all ended with some surprising results, affecting markets over the short term. Emerging Asia was the best-performing region in the period. Stock markets in Taiwan and Korea rose sharply, thanks to the ongoing frenzy over AI, which buoyed the information technology sector, the flagship industry for both countries. India's stock market surged after the country's election results despite a somewhat disappointing show by Prime Minister Narendra Modi. Indonesia's stock market slid on concerns about high interest rates and as the country gets acclimated to a new government. China's stock market advanced on positive sentiment about the country's improving economic outlook. Latin America was the worst-performing region. Mexico's stock market tumbled 16.1% in response to the results of the country's presidential election. Investors were concerned that the Morena Party's landslide win would allow it to claim a mandate to enact aggressive reforms. Stock markets in Colombia and Chile fell sharply, weighed down by the stock prices of raw materials producers. Brazil's stock market receded on political uncertainty that could adversely impact energy and retail companies. Peru's stock market finished the quarter modestly higher. The region encompassing emerging Europe, the Middle East, and Africa (EMEA) underperformed. Most stock markets in emerging Europe recorded gains, as some companies announced strong results. Turkey's stock market rose on positive sentiment about the country's more orthodox monetary policy. Greece's stock market fell modestly on profit-taking after a very strong period. Stock markets in the Gulf fell in sympathy with the fall in crude oil prices. South Africa's stock market surged after the country's election, which raised the possibility of a coalition government between the African National Congress and the pro-market Democratic Alliance (DA). Information technology, communication services, and utilities were the best-performing sectors in the quarter. Healthcare, consumer staples, and materials were the worst-performing sectors. (Index returns are measured net of taxes and in US dollar terms.) In the second quarter, the Emerging Markets Core Equity Portfolio (MUTF:ECEIX) gained in absolute terms and performed in line with its benchmark, the MSCI Emerging Markets Index. (Excess return is measured net of fees and in US dollar terms.) Stock selection in the information technology and materials sectors boosted relative performance, as did stock selection in Taiwan and Korea. Higher-than-index exposures to South Africa contributed. Lower-than-index exposures to the materials sector and to Saudi Arabia and Korea were beneficial to relative performance. Shares of Taiwan Semiconductor Manufacturing Company (TSM, 11.6% weighting) traded higher on bullish sentiment about the Taiwan-based contract chipmaker's upside potential amid a strong demand upcycle. Traders bid up shares of Tencent (OTCPK:TCEHY, 5.1% weighting) after the China-based social media and games company reported better-than- expected quarterly earnings. The results confirmed a structural shift towards higher margin businesses such as Video Account ads amid signs that adjustments made in the games division were beginning to show improvement. Shares of hynix (OTCPK:HXSCF, 3.1% weighting) advanced on bullish sentiment about the demand upcycle for the Korea-based chipmaker's high bandwidth memory chips. Stock selection in the financials and consumer discretionary sectors undercut relative performance, as did stock selection in China. Higher-than-index exposures to the consumer staples sector and to Mexico detracted. Lower-than-index exposures to the communication services sector and to India were detrimental to relative performance. Shares lender Banco BTG Pactual (1.3% weighting) declined as part of a broader fall in Brazil's stock market stemming from political concerns. Shares came under additional pressure from worries about the company's revenue targets. Shares of lender Banorte (OTCQX:GBOOY, 1.3% weighting) declined as part of a broader fall in Mexico's stock market stemming from political risks after Mexico's election and a weaker peso. Shares of YUM China (YUMC, 0.9% weighting) faltered after the China-based fast food restaurant operator reported disappointing margins. We believe that the unsynchronized global economic environment is resulting in a relatively balanced level of economic activity that is positive for equities. As long as this does not change or some significant exogenous risks appear, it should be a reasonably good backdrop for emerging markets equities. Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.

Lazard U.S. Small Cap Equity Select Portfolio Q2 2024 Commentary

Small caps are poised to outperform due to economic resilience, subdued inflation, lower interest rates, and a cyclical upturn, trading at a significant discount to large caps. Small cap US equities fell in the second quarter, as changing interest-rate expectations weighed on risk sentiment. While markets fell early in the period as the prospect of US rate cuts was pushed out to further in the future, investors gained optimism throughout the quarter as several months of encouraging inflation data revived hopes that the Fed will begin a monetary easing cycle this year. Other economic data were mixed during the quarter, as the economy continued to add jobs at a robust pace, but first-quarter GDP came in below expectations, hurt by slower consumer spending. The conclusion of the first-quarter earnings season painted a mixed picture for small cap companies, which are more susceptible to the ebb and flow of the domestic economy, amid interest-rate headwinds. According to FactSet data, 60% of the companies in the Russell 2000 Index (RTY) topped consensus estimates, which surpassed the 59% average beat rate from the past four quarters. Against this backdrop, the Russell 2000 Index fell 3.3% in the second quarter, trimming its year-to-date gain to 1.7%. (Index performance is measured as a total return and in US dollar terms.) Stock selection in the financials sector: Alternative asset manager StepStone (STEP) reported quarterly results that were above expectations, driven by higher fee-earnings assets under management and disciplined cost control. Stock selection in the information technology sector: Semiconductor equipment maker Onto Innovation (ONTO) reported quarterly results that exceeded expectations, driven by strong demand for its products amid accelerated investment in artificial intelligence. Rapid innovation and growing demand for high-bandwidth memory is resulting in increased packaging complexity, driving demand for Onto's advanced packaging inspection and metrology tools. Stock selection in the healthcare sector: Sleep apnea treatment maker Inspire Medical (INSP) reported lower quarterly revenues in the US, driven by slower-than-expected procedures. Stock selection in the consumer discretionary sector: Japanese restaurant operator Kura Sushi (KRUS) reported weaker quarterly results and guidance, which the management attributed to softness in California stemming from tighter restaurant regulations that were recently enacted by the state. We believe small caps are well positioned to outperform as economic resilience, subdued inflation, lower interest rates, and a cyclical upturn provide a tailwind for the asset class. Small caps trade at a nearly two-standard-deviation discount to large caps despite significantly higher top- and bottom-line growth forecasts. We believe our strategy, given its focus on the relationship between financial productivity and valuation, will benefit from a broader and more normalized market and economic environment, and that our philosophy positions us favorably to generate alpha over the long term. Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.

Lazard Global Equity Select Portfolio Q2 2024 Commentary

Focus remains on investing in quality companies with sustained financial productivity and those poised for improvement, aiming for long-term outperformance. Equity markets worldwide gained in the second quarter, amid a generally positive outlook for interest rates and investor optimism regarding the impact of artificial intelligence. Markets continued their trend of extreme narrowness during the quarter, as chipmaker Nvidia (NVDA) continued its extraordinary rally. The company, along with Apple (AAPL), drove 65% of the MSCI All Country World Index's return during the quarter. Several months of encouraging inflation data revived hopes that the Fed will begin a monetary easing cycle this year. Other economic data were mixed during the quarter, as the US continued to add jobs at a robust pace, but first-quarter GDP came in below expectations, hurt by slower consumer spending. In the eurozone, the European Central Bank (ECB) lowered interest rates for the first time in nearly five years, citing a marked improvement in the eurozone's inflation outlook as the reason behind its pivot to a less restrictive monetary policy stance. In the UK, the Bank of England ('BOE') held its main interest rate steady even as inflation was slowing toward its 2% target, with expectations growing that rate cuts were imminent. However, European stocks came under pressure after far-right parties across several EU countries recorded significant gains in the European Parliament elections. The conclusion of the first-quarter earnings season painted a mixed picture of how company profits held up in an uncertain macro environment, as US companies generally beat expectations while results in Europe and Japan were more in-line. Against this backdrop, equity markets in both the developed and developing worlds gained in the second quarter, with the latter outperforming the former. In the US, stocks outperformed, thanks to strong earnings results and optimism that the Fed will retreat from its restrictive monetary policy stance this year. Across the Atlantic, stocks gained but lagged the broader global index due to lukewarm earnings results, concerns that future rate cuts from the ECB will be limited, and political risks. In Japan, stocks declined due to profit-taking in April and a sell-off in June over concerns that the weakening yen may adversely impact the Japanese economy. Meanwhile, in emerging markets, China's stock market outperformed, thanks to policy support for the country's beleaguered property sector and signs that the country's economic outlook was improving. In the second quarter, the Lazard Global Equity Select Portfolio (MUTF:GESIX) slightly underperformed the return for the MSCI All Country World Index. (Portfolio returns are measured net of fees and in US dollar terms.) Stock selection in the industrials sector contributed to performance. ABB (OTCPK:ABBNY), a leader in electrical equipment and automation solutions (2.1% weighting in the Portfolio), reported better-than-expected quarterly earnings, driven by strength in electrification and process automation. We expect the company to continue to benefit from structural growth in electrification and energy efficiency and because of its divestment of lower growth businesses and better accountability in its business units. ABB has also structurally improved margins, and we believe it will continue to grow margins over the next couple of years. Stock selection in the communication services sector also contributed to performance. Google parent Alphabet (GOOG,GOOGL) 4.9% weighting in the Portfolio) reported good results, including solid revenue growth and strong expense management, driving margin expansion, investments in artificial intelligence, and returning free cashflow to shareholders. We continue to like Alphabet's significant barriers and advantages in its core search business, and the company's ability to innovate at a scale, driving growth and creating new adjacent opportunities. In contrast, stock selection in the consumer staples sector detracted from performance. Estée Lauder (EL), a prestige beauty company (0.6% weighting in the Portfolio), reported strong earnings, and an inflection in sales growth and gross margin as well as an improvement in inventories. However, the stock fell on lower-than-expected Q4 guidance and concerns around consumer/macro data points. We continue to own Estée Lauder as we expect the company's margin and return profile to recover to historic highs and that structural changes in the fragrance and US businesses, expected profit improvement in makeup, and changes in the company's Asian manufacturing footprint to provide multi-year tailwinds. Stock selection and an underweight in the information technology sector detracted. Shares of Accenture (ACN, 2.7% weighting in the Portfolio) continued to lag amid cyclical weakness, as an uncertain macro environment pressured customer budgets and delays on discretionary spend and smaller projects. However, Accenture reported better than expected earnings in June and maintained guidance for the year, pointing to increasing confidence in stabilization. We think Accenture is well-positioned, as more enterprises need to move to the cloud, upgrade data, and digitize their business processes before they can adopt and integrate AI into their organizations. We are confident that Accenture will continue to benefit from these structural growth opportunities and will gain a larger share of customer budgets. We expect to see continued volatility as the Fed and other central banks seek to balance the goals of maintaining financial stability and controlling inflation. While artificial intelligence has the potential to transform the way companies operate over the long term, we are cautious that the exuberance surrounding it may drive valuations in certain stocks to unsustainable levels in the short term. We remain focused on our philosophy of investing a majority of the portfolio in quality companies (Compounders) that can sustain elevated levels of financial productivity and supplementing them with companies that we believe can improve their financial productivity (Improvers). A broadening out of index participation will present a better environment for quality investing, and we believe that the empirical work done by co-lead portfolio manager/analyst Louis Florentin-Lee in Relative Value Investing and its update, Quality Investing, shows that our philosophy is one that should deliver outperformance over time. Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.

Lazard Developing Markets Equity Portfolio Q2 2024 Commentary

Boosted by ongoing investor excitement over artificial intelligence, equity markets in the developing world, as measured by the MSCI Emerging Markets Index, rose 5.0% in the second quarter. Emerging Asia dramatically outperformed the broader market index, rising 7.4%. Eastern Europe also performed well, climbing 6.7%. Latin Lazard Asset Management is known for its global perspective on investing and its experience with global, regional and domestic portfolios. We believe in fostering a culture of constant dialogue between teams. The resulting views bring us the unique, firsthand market insights that are the key to our long-term success. At Lazard Asset Management having an entrepreneurial spirit means that our teams are independent, but supported by a central infrastructure. This central infrastructure allows teams to focus on what they do best. With over $229.7 billion in assets under management (as of December 31, 2020). We have offices located throughout the world. Note: Lazard Asset Management is not an analyst publishing actively on Seeking Alpha; rather, our editors excerpt and republish from Lazard Asset Management's publicly-available statements and letters. Lazard Asset Management is known for its global perspective on investing and its experience with global, regional and domestic portfolios. We believe in fostering a culture of constant dialogue between teams. The resulting views bring us the unique, firsthand market insights that are the key to our long-term success. At Lazard Asset Management having an entrepreneurial spirit means that our teams are independent, but supported by a central infrastructure. This central infrastructure allows teams to focus on what they do best. With over $229.7 billion in assets under management (as of December 31, 2020). We have offices located throughout the world. Note: Lazard Asset Management is not an analyst publishing actively on Seeking Alpha; rather, our editors excerpt and republish from Lazard Asset Management's publicly available statements and letters.

Lazard U.S. Equity Focus Portfolio Q2 2024 Commentary

The trend of extreme market narrowness persisted during the quarter, as chipmaker Nvidia (NVDA) continued its extraordinary rally, briefly surpassing Microsoft (MSFT) as the world's largest company and driving nearly half of the S&P 500 Index's (SP500, SPX) returns during the period. The quarter was also marked by improving investor sentiment about the economy and the outlook for interest rates, as several months of encouraging inflation data revived hopes that the Fed will begin a monetary easing cycle this year. Other economic data were mixed during the quarter, as the economy continued to add jobs at a robust pace, but first-quarter GDP came in below expectations, hurt by slower consumer spending. However, the conclusion of the first-quarter earnings season painted an encouraging picture of how corporate profits have held up against interest-rate headwinds. According to FactSet data, 80% of the companies in the S&P 500 Index topped consensus estimates, and first-quarter earnings grew 6.0% from a year earlier. Against this backdrop, the S&P 500 Index advanced 4.3% in the second quarter, raising its year-to-date gain to 15.3%. (Index performance is measured as a total return and in US dollar terms.) In the second quarter, the Lazard US Equity Focus Portfolio (MUTF:LZUSX) rose 1.9%, underperforming the 4.3% return of its benchmark, the S&P 500 Index. (Portfolio return is measured net of fees and in US dollar terms.) Stock selection in communication services: Google parent Alphabet (GOOG,GOOGL, 6.7% weighting in the Portfolio) reported solid results, including strong expense management, margin expansion, investments in artificial intelligence, and returns of free cash flow to shareholders. We continue to like Alphabet's significant barriers and advantages in its core search business and the company's ability to innovate at scale, driving growth and creating new adjacent opportunities. Stock selection in the financials sector: Goldman Sachs (GS, 3.8% weighting) reported strong quarterly results, driven by strong revenues in its markets and investment banking segments coupled with a lower-than-expected provision for credit losses. We think Goldman Sachs can improve its returns, driven by a combination of investment banking fees recovering from cyclical lows and a transition of the asset management business toward a more fee-based model. Stock selection in consumer staples: Estée Lauder (EL, 1.1% weighting), a prestige beauty company, reported strong earnings, and an inflection in sales growth and gross margin, as well as an improvement in inventories. However, the stock fell on lower-than- expected Q4 guidance and concerns around consumer/macro data points. We continue to own Estée Lauder as we expect the company's margin and return profile to recover to historic highs and that structural changes in the fragrance and US businesses, expected profit improvement in makeup, and changes in the company's Asian manufacturing footprint will provide multi-year tailwinds. Stock selection and an underweight position in information technology: Shares of Accenture (ACN, 2.6% weighting) lagged after the company announced plans to purchase Unlimited, an integrated customer engagement agency, the latest in a series of investments the company has announced despite an uncertain macro environment and management's expectations for a slower improvement in the second half of 2024. However, we think Accenture is well-positioned, as more enterprises need to move to the cloud, upgrade data, and digitize their business processes before they can adopt and integrate AI into their organizations. We continue to expect Accenture to continue to benefit from these structural growth opportunities and gain a larger share of customer budgets. We expect to see continued volatility as the Fed and other central banks seek to balance the goals of maintaining financial stability and controlling inflation. While artificial intelligence has the potential to transform the way companies operate over the long term, we are cautious that the exuberance surrounding it may drive valuations in certain stocks to unsustainable levels in the short term. We remain focused on our philosophy of investing a majority of the portfolio in quality companies (Compounders) that can sustain elevated levels of financial productivity and supplementing them with companies that we believe can improve their financial productivity (Improvers). A broadening out of index participation will present a better environment for quality investing, and we believe that the empirical work done by co-lead portfolio manager/analyst Louis Florentin-Lee in Relative Value Investing and its update, Quality Investing, shows that our philosophy is one that should deliver outperformance over time. Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors. Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.

Lazard Opportunistic Strategies Portfolio Q2 2024 Commentary

Equity markets worldwide gained in the second quarter, amid a generally positive outlook for interest rates and investor optimism regarding the impact of artificial intelligence. Markets continued their trend of extreme narrowness during the quarter, as chipmaker Nvidia ( Lazard Asset Management is known for its global perspective on investing and its experience with global, regional and domestic portfolios. We believe in fostering a culture of constant dialogue between teams. The resulting views bring us the unique, firsthand market insights that are the key to our long-term success. At Lazard Asset Management having an entrepreneurial spirit means that our teams are independent, but supported by a central infrastructure. This central infrastructure allows teams to focus on what they do best. With over $229.7 billion in assets under management (as of December 31, 2020). We have offices located throughout the world. Note: Lazard Asset Management is not an analyst publishing actively on Seeking Alpha; rather, our editors excerpt and republish from Lazard Asset Management's publicly-available statements and letters. Lazard Asset Management is known for its global perspective on investing and its experience with global, regional and domestic portfolios. We believe in fostering a culture of constant dialogue between teams. The resulting views bring us the unique, firsthand market insights that are the key to our long-term success. At Lazard Asset Management having an entrepreneurial spirit means that our teams are independent, but supported by a central infrastructure. This central infrastructure allows teams to focus on what they do best. With over $229.7 billion in assets under management (as of December 31, 2020). We have offices located throughout the world. Note: Lazard Asset Management is not an analyst publishing actively on Seeking Alpha; rather, our editors excerpt and republish from Lazard Asset Management's publicly available statements and letters.

Lazard U.S. Equity Concentrated Portfolio Q2 2024 Commentary

Continued market volatility is expected as central banks balance financial stability and inflation control, with a focus on companies sustaining high financial productivity and AI-driven growth. The trend of extreme market narrowness persisted during the quarter, as chipmaker Nvidia (NVDA) continued its extraordinary rally, briefly surpassing Microsoft as the world's largest company and driving nearly half of the S&P 500 Index's (SP500, SPX) returns during the period. The quarter was also marked by improving investor sentiment about the economy and the outlook for interest rates, as several months of encouraging inflation data revived hopes that the Federal Reserve will begin a monetary easing cycle this year. Other economic data were mixed during the quarter, as the economy continued to add jobs at a robust pace, but first-quarter GDP came in below expectations, hurt by slower consumer spending. However, the conclusion of the first-quarter earnings season painted an encouraging picture of how corporate profits have held up against interest-rate headwinds. According to FactSet data, 80% of the companies in the S&P 500 Index topped consensus estimates, and first-quarter earnings grew 6.0% from a year earlier. Against this backdrop, the S&P 500 Index advanced 4.3% in the second quarter, raising its year-to-date gain to 15.3%. (Index performance is measured as a total return and in US dollar terms.) In the second quarter, the Lazard US Equity Concentrated Portfolio (MUTF:LEVIX) underperformed its benchmark, the S&P 500 Index. (Excess return is measured net of fees and in US dollar terms.) Shares of (6.2% weighting in the Portfolio) traded higher after the semiconductor and infrastructure software products provider Broadcom (AVGO) reported better-than-expected quarterly earnings, driven by artificial intelligence networking. Shares received an additional boost after the company raised guidance. We expect Broadcom to be able to sustain its high returns over the long term, given its leadership in AI optimization. Alphabet (GOOG,GOOGL, 4.1% weighting in the Portfolio), the parent company of internet search giant Google, saw its stock price climb after reporting solid quarterly results, including strong expense management, margin expansion, investments in AI, and returns of free cash flow to shareholders. We continue to like Alphabet's significant barriers and advantages in its core search business and the company's ability to innovate at scale, driving growth and creating new adjacent opportunities. Shares of Oracle (ORCL, 5.6% weighting in the Portfolio) rose after the software and services provider reported strong quarterly bookings, and management guided to accelerating growth each successive quarter in fiscal year 2025, with capital expenditures doubling year- over-year. We see further upside for Oracle as more legacy customers realize the utility of shifting to the company's cloud offerings, while cloud end markets continue to expand, and more enterprises seek to bolster existing infrastructure with supplemental providers. We expect demand to be further augmented by growing customer needs for AI computing capacity. Shares of Live Nation (LYV, 0.0% weighting in the Portfolio) fell on news that the Department of Justice's antitrust lawsuit against the live entertainment company could begin sooner than expected. We think the lawsuit will likely last longer than expected (two or three years). While we still believe Live Nation is a great asset, too much legal uncertainty led us to deploy capital toward better opportunities. Shares of Labcorp (LH, 0.0% weighting in the Portfolio ) traded lower after the healthcare diagnostics company announced a surprising, initially dilutive acquisition. We exited the Portfolio's position in favor of better risk-reward opportunities. Despite reporting quarterly earnings that were in line with consensus estimates, shares of payments company Corpay (CPAY, 4.1% weighting in the Portfolio) saw its stock price fall after results in its North American vehicle and lodging businesses were weaker- than-expected due to transient issues. However, management believes both segments will return to organic growth in the fourth quarter. Corpay is one of the most financially productive companies in our investible universe, thanks primarily to its competitive advantages. The company enjoys high barriers to entry through its proprietary, closed-loop payment networks, specialized multichannel sales networks, and high switching costs for customers (92% renewal rate). We expect to see continued volatility as the Fed and other central banks seek to balance the goals of maintaining financial stability and controlling inflation. While artificial intelligence has the potential to transform the way companies operate over the long term, we are cautious that the exuberance surrounding it may drive valuations in certain stocks to unsustainable levels in the short term. We remain focused on our philosophy of investing in companies that can sustain elevated levels of financial productivity and supplementing them with companies that we believe can improve their financial productivity. Combined with the changes we've implemented in the strategy over the past quarter, we believe a broadening out of index participation will present a better environment for our style of investing and should deliver outperformance over time. Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors. Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.

Lazard Managed Equity Volatility Portfolio Q2 2024 Commentary

Growth and quality measures recovered in June, contributing positively overall. The rally in global equity markets continued in the second quarter with a 2.2% quarterly gain, marking the third straight positive quarter. The market has now rebounded nearly 25% from September's lows (MSCI AC World Index in USD). Gains have been driven by several forces: strong corporate earnings, subsiding inflationary pressures, and anticipated artificial intelligence productivity enhancements. The United States continues to dominate the global equity landscape, and the Magnificent Seven, led by Nvidia (NVDA, 149% year to date), now accounts for more than 60% of the US market's gains. Spending on AI continues to drive earnings for all related companies, including utilities, due to the high electricity demand. This has created a bifurcated market, with the average US stock underperforming the broad cap-weighted index by nearly 10% year to date, a level not seen in over 35 years. Asian markets boasted a strong quarter, but still lagged the United States. Taiwan, with its dominant technology exposure, was the leading market in the region, rising over 15% in the quarter. India recovered in June after the surprise election results, which may temper Prime Minister Modi's political powers. Despite losing 2% in June, China rose more than 7% in the quarter as the government took stimulus actions to address its real estate overhang and weak consumer spending. Japan managed a gain in local currency terms, but the Bank of Japan's interest rate policy continues to weigh on the yen, which depreciated another 7% in the quarter. European stocks delivered a positive quarter as the eurozone continues to deal with inflation that remains well above the European Central Bank's (ECB) 2% target. Wage pressures continue to drive inflation fears as labor shortages and low unemployment persist. Despite the inflation news, the ECB cut its interest rates from 4% to 3.75%, arguing that it was still far from a neutral rate and needed to spur the economy. The political implications of the French elections will likely add to market volatility in the third quarter. Sector performance reflected the narrow market, as only five sectors finished with a positive return in the quarter. Information technology and communication services stocks dominated the market with returns of 11% and 8%, respectively. Real estate and materials stocks lagged. Factor effectiveness was muted in the second quarter, especially in comparison to the strong first quarter. Sentiment was the most consistent factor for the quarter, adding modest value in each month. Value measures worked well in April but trailed off in the later part of the quarter. Growth worked well in June but detracted in the first half of the quarter. Quality provided incremental return in the first half and again in the final week of the quarter, but was the weakest factor overall. Roche (OTCQX:RHHBY), which has a 1.8% weighting in the Portfolio. The company's pharmaceutical and diagnostics divisions each achieved a 2% growth rate at constant currency following the first-quarter results. The underlying constant-currency growth was a robust 7% when excluding the impact of reduced COVID-related antibody and diagnostic sales. Management has reaffirmed its guidance, anticipating mid-single-digit constant-currency sales growth and core earnings per share growth for the full year. Walmart (WMT, 1.5% weighting in the Portfolio) delivered impressive first-quarter results, driven by its competitive pricing and strategic digital investments, which continue to attract a diverse consumer base. Total revenue grew by 6%, with gains seen across both domestic and international segments. The retailer is well-positioned to continue capturing market share across various income groups. Bristol-Myers Squibb (BMY), which has a 1.2% weighting in the Portfolio. The company's first-quarter results were mixed, with new- product sales falling short of market expectations. Despite Revlimid's strong performance, its impact on the stock's valuation was limited due to the anticipated rapid sales decline as it faces increasing generic competition over the next few years. CVS Health (CVS, 0.6% weighting in the Portfolio) reported weak first-quarter results, primarily due to reduced profits in its Medicare Advantage ('MA') segment. Increased medical utilization and mispriced plans led to a decline in insurance segment profits, while the pharmacy benefit management business was impacted by the loss of the Centene (CNC) contract. Consequently, management lowered its 2024 guidance, citing the ongoing challenges in the MA segment. Investors have continued to benefit from strong equity market returns in the first half of 2024, creating an increasing disparity in stock valuations within and across markets. Despite generally improving economic conditions, neither emerging market nor small cap stocks have enjoyed a return premium befitting their risk profile. As we look forward to the balance of 2024, we expect that US inflation will continue to ease and the strength of the dollar will take a greater toll on corporate profits. This should allow the US Federal Reserve to cut rates at year-end providing a lift to equity investors. The November election will certainly raise investor anxiety and add to market volatility. The outcome will likely have a profound influence on the market direction in the following months. Conditions in Europe should favor further central bank easing and economic growth. China's government continues its desire to stimulate its economy. We expect more specific stimulus to be announced during the Third Plenum in July, which may provide reasons for optimism over the latter half of 2024. Japan also appears to be on a path to balancing growth and inflation, and we see an end to its zero interest policies finally supporting the yen. In sum, we expect that US election uncertainty and geopolitical tensions will elevate market volatility despite a favorable trend in corporate profits. We believe that segments of the equity markets that have been out of favor will revert in the second half with the US dollar weakening, specifically small cap and emerging market stocks. Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.