Message from Chief Investment Officer Rod June

This calendar year has been an interesting one for investors. While there has been a sizable amount of geo-political uncertainty, constraints on free market trade, and elevated interest rates, the markets have held up reasonably well as LACERS finished its fiscal year ending June 30, 2025, with a one-year return of 10.96%, net of fees, and a portfolio valued at $25.23 billion. The U.S. economy remains anchored by solid earning fundamentals as investors entered the second half of the calendar year with over 70% of U.S.-based companies meeting or beating return expectations in the second quarter of 2025. Despite initial fears regarding tariffs that resulted in a market selloff, strong credit fundamentals and healthy cash balances have given consumers continued optimism towards the capital markets. The overall impact resulted in the S&P 500 returning 7.78% year to date through July 31, 2025, with other equity indices reflecting varying degrees of bull market sentiment.

While inflation remains sticky and above the Federal Reserve’s 2% target, the consensus from industry experts project that the Federal Reserve may be cutting interest rates by 25-50 basis points before year-end. Higher costs from tariffs, initially deemed to cause an immediate impact on consumer purchasing power, have been more moderate than originally expected. Housing, a major component of GDP, has seen sales lag due to supply constraints and higher interest rates. Despite the mixed bag of positive growth amid several downside risk factors, LACERS continues to manage its portfolio with a cautionary tone as investment markets continue to meander with elevated degrees of volatility.