Touchstone Large Cap Fund: Navigating Q2 2025 Market Dynamics and Future Outlook

The second quarter of 2025 proved to be a dynamic period for large-cap equities, marked by continued economic recalibration and evolving investor sentiment. The Touchstone Large Cap Fund actively navigated these conditions, focusing on its core strategy of identifying high-quality, resilient companies poised for long-term growth.

Our commentary provides a comprehensive review of the fund's performance, key market drivers, and our strategic positioning as we look ahead.

During Q2 2025, the broader large-cap market, as represented by the S&P 500 Index, experienced moderate gains. These were primarily driven by sustained corporate earnings resilience in select sectors and a more stabilized interest rate outlook from the Federal Reserve.

However, underlying market leadership showed shifts, with a notable rotation within technology and an increased focus on industrial and healthcare innovators. The fund's performance reflected a diligent balance between capturing growth opportunities and maintaining defensive positioning against potential headwinds, such as persistent inflationary pressures in specific segments and lingering geopolitical uncertainties.

Our strategic allocation during the quarter emphasized companies with strong balance sheets, robust free cash flow generation, and clear competitive advantages.

Key contributors to the fund's performance included our overweight positions in certain advanced semiconductor manufacturers, which benefited from increasing demand in AI infrastructure, and a carefully selected cohort of healthcare companies innovating in biotechnology and medical devices. Conversely, underperforming sectors, particularly some consumer discretionary names facing pressure from shifting spending habits, presented minor headwinds, though these were largely mitigated by our disciplined stock selection process.

A significant aspect of our Q2 strategy involved rebalancing certain sector exposures.

We incrementally reduced positions in highly valued growth stocks where our models indicated a diminishing risk-reward profile, reallocating capital towards fundamentally sound companies demonstrating attractive valuations and clear catalysts for future appreciation. This proactive management ensured the portfolio remained aligned with our long-term objectives while adapting to immediate market signals.

Our investment committee maintains a rigorous fundamental analysis approach, scrutinizing management quality, industry trends, and valuation metrics for every holding.

Looking beyond Q2, we anticipate a continued complex but potentially rewarding landscape for large-cap investors. While inflation remains a watchpoint, the global economy appears to be on a path of gradual normalization.

Technological advancements, particularly in artificial intelligence, continue to create transformative opportunities, and we believe companies at the forefront of these innovations will offer compelling long-term value. Our strategy for the coming quarters will focus on reinforcing positions in high-conviction ideas, identifying new opportunities emerging from global trends, and maintaining a vigilant eye on macroeconomic data and corporate earnings reports.

The Touchstone Large Cap Fund remains committed to its disciplined investment philosophy, aiming to generate superior risk-adjusted returns for our shareholders.

We thank you for your continued trust and invite you to review our detailed holdings and performance reports available on our website for further insights into your investment.