Putnam US Value Equity
Mandate commentary
Q4 2025
Highlights
① In another strong environment for U.S. equities, the portfolio outperformed its benchmark, the Russell 1000 Value Index.
② Global growth strengthened as inflation eased, and policy turned supportive.
③ Equities and quality fixed income remain positioned for growth.
Mandate overview
For the quarter, U.S. equities, as measured by the S&P 500 Index, returned 2.66%. Early in the quarter, markets responded positively to strong earnings from a range of sectors and a truce in the ongoing U.S.-China trade war. In October, the U.S. Federal Reserve (the Fed) approved its second straight interest-rate cut. Concerns about stretched valuations for technology stocks weighed on markets, as did the U.S. government shutdown, which ended in early November. Equity indices experienced modest declines toward year-end.
The portfolio outperformed the benchmark in the quarter. Relative performance was driven by strong stock selection, with sector allocation decisions detracting modestly.
The financials, consumer discretionary and industrials sectors contributed most to the stock selection strength. Information technology holdings detracted somewhat. From a sector allocation perspective, relative performance was hurt by an underweight
Mandate: US Large Cap Value Concentrated SMA
Performance contributors
Southwest Airlines: the overweight position was a top contributor, as investors built excitement for new earnings growth initiatives.
General Motors: an overweight was a contributor, as the company reduced the expected impact from tariffs and the perception of regulatory relief for automakers.
Freeport-McMoRan: an overweight position contributed positively, due to improving copper prices.
Performance detractors
Micron Technology: a lack of ownership weighed on relative results. Shares have been driven by an extended commodity memory upcycle.
Microsoft: an out-of-benchmark holding was a detractor. Shares underperformed, as AI competitive concerns escalated.
PulteGroup: an overweight position had a negative impact. Potential regulatory changes pressured shares of home builders.
Total gross returns:
Total return | QTD | YTD | 1YR | 3YR | 5YR | since INC. (NOV. 14, 2016) |
PUTNAM US VALUE EQUITY | 7.11%
| 23.91%
| 23.91%
| 20.66%
| 18.46%
| 15.80%
|
Mandate repositioning
The U.S. economy and equity markets demonstrated resilience in 2025, despite concerns surrounding the impact of import tariffs. We expect investors will continue to focus on actions from a divided U.S. Federal Reserve. The Fed is challenged with a combination of inflation that is above target and a weakening employment outlook.
Economic growth should be supported by an ongoing weak U.S. dollar. Growth could accelerate, due to the Trump administration’s One Big Beautiful Bill, which supports increased capital spending and ongoing expansionary tactics.
Equity valuations have been elevated by optimism over accelerating economic growth and the potential of AI to boost innovation, capital spending and productivity. Markets could be vulnerable to results that don’t meet the high expectations. However, high valuations could be supported by continued high earnings growth.
By sector, we remain within +/-5% of benchmark weight. Currently, we are most overweight consumer staples and consumer discretionary. While financials is the largest weight in the portfolio, it is currently underweight. Communication services, industrials and real estate also remain below benchmark weight.
Market overview: global growth strengthened, inflation eased, policy supportive
Markets ended the fourth quarter of 2025 on a strong note, capping a year defined by resilience and broad-based gains. Equities led performance, as investors looked beyond policy noise and focused on improving fundamentals. Global markets advanced, supported by steady corporate earnings, easing inflation pressures and a clear shift toward lower interest rates. Canada outperformed most developed peers, driven by strength in materials and financials, while European and Asian markets rebounded on firmer trade activity and renewed investor confidence. In the U.S., equity performance remained positive, led by technology and communication services, with improving breadth across sectors signalling a healthier market foundation.
Fixed income delivered modest but positive returns, as central banks continued to ease policy. Government yields declined on the short end while longer maturities remained stable, allowing coupon income to drive returns. Credit conditions stayed firm, underscoring the strength of corporate balance sheets entering 2026.
Market outlook: equities and quality fixed income positioned for growth
Entering 2026, global markets are positioned on a solid footing. Easing monetary policy and supportive fiscal conditions are expected to sustain growth across major economies. In the U.S., healthy earnings and productivity gains continue to anchor performance. Canada benefits from resource strength and steady financials, while Europe and Asia offer improving valuation opportunities through accelerating trade and industrial expansion. Fixed income markets provide renewed income potential as yields stabilize, and credit quality remains robust.
Overall, conditions favour a balanced, diversified approach.
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