From a sector perspective, as shown in Table 1, information technology was the leader up 23.5% during the quarter, followed by Communication Services 18.2% and Industrials 12.6%. Three sectors posted negative returns; Energy declined 9.4%, Health Care fell by -7.6%, and REITs marginally declined by -1.0%. Despite the strong performance of U.S. equities, international stocks outperformed for the period, which was likely driven by the fact that dollar index (DXY) fell 7.1% for the period, boosting returns for dollar-based investors.

Table 1

Source: Charles Schwab, Bloomberg

When looking at other factors, High beta stocks appreciated 24.8% during the quarter, which beat low beta stocks, which declined -2.6% during the quarter, as shown in Chart 1. Similar dispersion was seen when comparing growth to value. The Russell 1000 Growth appreciated 17.8% during the quarter, which handily outperformed the Russell 1000 Value’s 3.8% return in the quarter shown in Chart 2.

Chart 1

2Q25 S&P 500 Index total return vs. Index High Beta/Low Volatility (Indexed to 100)

Source: Factset

Chart 2

2Q25 S&P 500 Index total return vs. Russell 1000 Growth /1000 Value (Indexed to 100)

Source: Factset

For the quarter, economic resilience was demonstrated by the fact that the Industrials and Financials sectors both achieved new highs. Employment Payrolls while slowing have remained consistently positive. Conversely, data such as weak housing starts and lower consumer confidence paint another picture. The weaker soft data however have not been reflected in the hard data yet. Given this backdrop, the Federal Reserve has held interest rates unchanged, concerned with the potentially inflationary impact of tariffs. The Federal Reserve dot plot still forecasts two rate cuts for the year.

S&P 500 earnings are forecast to rise 5% in the second quarter, down from an earlier 9.4% estimate. Revenues are now forecast to rise 4.2% from an earlier 4.7%. Despite a slowing in earnings growth, 75% of companies have beaten earnings estimates in their most recent quarterly report. With the strong equity rally in May and June, stock market valuations appear to be rich. The market is currently trading near 22x on a 12 month forward PE basis, well above the five-year and ten-year averages of 20x and 18.4x respectively.

The market valuation is heavily tilted by the dominant big cap technology sector. To illustrate this point further, as shown in Chart 3, unprofitable companies, led by unprofitable tech companies, outperformed their profitable counterparts.

Chart 3

2Q25 U.S. Market Returns

 Source: Bloomberg

Dividend Growth Scorecard

According to Howard Silverblatt, Senior Index Analyst at S&P Dow Jones Indices, in 2Q 2025, Dividend growth in the index rose 0.9% in the second quarter. The quarterly rise was much smaller than the prior period as tariffs created much uncertainty. Q3 dividend growth is looking better as the positive Fed stress test permits banks to hike dividends further. The cumulative dollar value of U.S. common stock dividends per share posted a 6.6% increase for the trailing twelve months¹. As seen in Table 2, on a year-to-date basis, 10 GICS sectors have seen a dividend increase in 2025. For the year, twenty-three of our thirty-seven holdings (62%) announced dividend increases of 8.6% on average.

Table 2

Brentview Dividend Growth (as of June 30, 2025)

With Microsoft being the sole exception of hiking their dividend by double digits for many years, most technology companies represented in the “Magnificent 7” are providing only modest dividend growth. They have opted to direct their capital allocation towards favoring share buybacks and keeping dry powder for Artificial Intelligence related spending. Apple, a long-time dividend payer, recently hiked their dividend by 4%, after starting with 10% dividend increases back in 2013. Meta Platforms and

 Google, both recent dividend initiators began with 5% dividend increases as they preferred share buybacks and increased spending on Artificial Intelligence. Nvidia’s current de minimis dividend has a spotty history of no raises for the past 6 years until last year.

MARKET OUTLOOK & PORTFOLIO POSTIONING

With the recently passed legislation, we believe our portfolio should benefit from the “big beautiful bill”. First, the lower corporate rate should help support future dividend growth and fewer bank regulations are freeing up capital. Additionally, the manufacturing of semiconductor plants in the U.S. is now financially incentivized. Finally, Nuclear energy is being resurrected around the country, supported by tax credits.

During the quarter we lowered our weightings in positions that derive sales from housing starts. We think this subgroup may be constrained longer than expected. Also, juxtaposed to the recent low-quality rally, we identified an industrial stock with no debt, a factor we deem high quality. We are evaluating the bank sub-sector to determine which ones might have the best dividend growth prospects post the Fed’s stress test. So far this year, the meager dividend growth from some non-banks has been disappointing.

Q1 and Q2 have seen dramatically different factors lead the way. In the 1^st quarter lower beta generally outperformed the broader market. In the 2^nd quarter, it was the exact opposite. While volatility has remained constant, it’s this exact environment where dividend equities tend to perform best. Factors aside, this market seems to be creating opportunities for active management.

Sources

This commentary reflects the views of Brentview Investment Management and is subject to change as market and other conditions warrant. No forecasts are guaranteed. This commentary is provided for informational purposes only and is not an endorsement of any security, sector, or index. The commentary should not be seen as a solicitation or offer to buy or sell any securities. The advisor (Brentview Investment Management, LLC), and their employees and clients, may hold or trade the securities mentioned in this commentary. Diversification does not guarantee a profit or eliminate the risk of a loss. PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS.

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