Navigating the Horizon: Madison Moderate Allocation Fund's Strategic Playbook for Q2 2025

As we delve into the second quarter of 2025, the Madison Moderate Allocation Fund stands poised, actively navigating a complex yet evolving economic landscape. Our strategy is meticulously crafted, adapting to persistent inflationary pressures, a shifting interest rate environment, and nuanced market dynamics to optimize long-term growth and capital preservation for our investors.

The global economy continues to present a mixed picture.

While certain sectors demonstrate resilience and robust performance, others face headwinds from geopolitical uncertainties and supply chain disruptions. Our team meticulously analyzes leading economic indicators, employment data, and consumer sentiment to form a comprehensive outlook. We anticipate a period of continued, albeit moderate, economic expansion, supported by resilient consumer spending and ongoing innovation, particularly in technology-driven sectors.

Inflation remains a central focus of our analysis.

While the aggressive rate hikes of previous periods have shown some signs of tempering price increases, the path to sustained disinflation is proving to be less straightforward than many anticipated. Persistent wage growth, commodity price fluctuations, and evolving geopolitical factors contribute to an environment where inflationary pressures could re-emerge.

Our fund remains vigilant, understanding that inflation erodes purchasing power and can significantly impact asset valuations. This informs our strategic allocation decisions, favoring assets with strong pricing power and inflation-hedging characteristics.

Interest rate policy continues to be a pivotal determinant of market direction.

Central banks are balancing the imperative of taming inflation with the need to avoid stifling economic growth. We anticipate a period where interest rates, while potentially stabilizing, may remain elevated compared to the pre-pandemic era. This 'higher for longer' paradigm has profound implications for both equity and fixed income markets.

It places a premium on credit quality in bond portfolios and emphasizes companies with robust balance sheets and sustainable earnings growth in equity holdings.

Within our equity allocation, the Madison Moderate Allocation Fund maintains a diversified approach, favoring quality growth companies that demonstrate strong fundamentals, competitive advantages, and the potential for sustainable earnings.

We are particularly attentive to sectors poised to benefit from long-term secular trends, such as technological innovation, healthcare advancements, and renewable energy. Our rigorous bottom-up research focuses on identifying companies with strong management teams, healthy cash flows, and attractive valuations, even in a higher-rate environment.

We believe these attributes provide resilience and growth potential regardless of short-term market volatility.

Our fixed income strategy is designed to provide stability and income while mitigating interest rate risk. We emphasize a laddered approach to bond maturities, allowing us to capture opportunities as interest rates fluctuate.

High-quality corporate bonds and carefully selected municipal bonds form the cornerstone of our portfolio, offering attractive yields relative to their risk profiles. We also remain flexible, ready to adjust duration and credit exposure based on our evolving economic outlook and central bank guidance.

The goal is to generate consistent income streams and preserve capital, acting as a ballast against potential equity market downturns.

Overall, the Madison Moderate Allocation Fund's strategy for Q2 2025 is one of thoughtful adaptation and disciplined execution. We remain committed to our core principles of diversification, rigorous research, and risk management.

By carefully balancing our equity and fixed income exposures, and by staying attuned to the dynamic interplay of economic forces, inflation, and interest rates, we aim to deliver compelling risk-adjusted returns and help our investors achieve their long-term financial objectives in this complex market environment.