Navigating Large Cap Growth in a Volatile 2025 Market

The second quarter of 2025 was a rollercoaster for global equity markets, marked by sharp volatility and a dramatic recovery. The S&P 500 Index, a bellwether for large-cap U.S. equities, fell nearly 20% from its February highs in early April before rebounding to close the quarter near record levels, posting a 10.9% return [1]. This turbulence, driven by the delayed implementation of new tariffs and geopolitical uncertainties, underscored the importance of strategic positioning in large-cap growth strategies. For investors, the Touchstone Dynamic Large Cap Growth Fund and the Touchstone US Large Cap Focused ETF (LCF) emerged as compelling vehicles to navigate this environment, leveraging sectoral strengths and risk-adjusted returns.

Strategic Outperformance: Touchstone Dynamic Large Cap Growth Fund

The Touchstone Dynamic Large Cap Growth Fund outperformed its benchmark, the Russell 1000 Growth Index, during Q2 2025 [1]. This achievement was particularly notable given the quarter’s volatility, which saw the S&P 500 flirt with bear market territory following the Liberation Day tariff announcement. The fund’s success stemmed from its focus on high-conviction, growth-oriented stocks, particularly in the technology and communication services sectors. These sectors surged by 23.7% and 18.5%, respectively, during the quarter [1], aligning with the fund’s overweight positioning.

The fund’s resilience also reflected its active management approach. While the Magnificent 7 companies—accounting for a significant portion of the S&P 500—rose 18.6% in Q2, outperforming the rest of the index by 14% [3], the fund’s portfolio managers capitalized on this momentum while mitigating exposure to underperforming sectors. This tactical agility allowed the fund to deliver returns that exceeded its benchmark, even as broader markets fluctuated.

Touchstone US Large Cap Focused ETF: Closely Tracking the S&P 500

For investors seeking passive exposure, the Touchstone US Large Cap Focused ETF (LCF) demonstrated its value as a near-perfect mirror of the S&P 500. As of June 30, 2025, LCF’s net assets stood at $48.3 million [1], with its portfolio heavily weighted toward information technology (31.9%) and communication services (16.1%)—sectors that drove the S&P 500’s recovery [1]. Over the three-month period, the fund’s net asset value (NAV) returned 10.94%, nearly matching the S&P 500’s 10.9% gain [1].

LCF’s performance highlights the advantages of a focused, rules-based strategy. By emphasizing large-cap growth stocks and minimizing exposure to smaller, more volatile names, the ETF provided a smoother ride during Q2’s turbulence. Its alignment with the S&P 500’s sector dynamics—particularly the outperformance of the Magnificent 7—ensured it captured the market’s rebound without excessive risk.

Sector Allocation and Macroeconomic Positioning

The Q2 2025 market environment was defined by divergent sector performance. Technology and communication services led the charge, fueled by robust corporate earnings and favorable trade agreements [3]. The Touchstone funds’ sector allocations mirrored these trends, with LCF’s 31.9% tilt toward information technology and the Dynamic Fund’s active overweights in high-growth tech stocks positioning them to capitalize on these tailwinds.

Meanwhile, macroeconomic factors such as resilient economic activity and delayed tariff implementations provided a floor for markets [3]. The S&P 500’s 2.2% gain in July 2025, bringing its year-to-date return to 8.6% [3], further reinforced the case for large-cap growth strategies. Both Touchstone funds were well-positioned to benefit from this macro backdrop, with their portfolios emphasizing companies poised to thrive in a low-inflation, earnings-driven environment.

A Compelling Case for Immediate Action

For investors, the Q2 2025 experience underscores the value of large-cap growth strategies in volatile markets. The Touchstone Dynamic Large Cap Growth Fund’s active management and sectoral focus enabled it to outperform its benchmark, while LCF’s passive, rules-based approach delivered returns closely aligned with the S&P 500. Both funds demonstrated strong risk-adjusted performance, with LCF’s 10.94% NAV return and the Dynamic Fund’s outperformance over the Russell 1000 Growth Index offering clear evidence of their efficacy.

As markets continue to navigate macroeconomic uncertainties, the strategic positioning of these funds—rooted in high-conviction tech and communication services exposure—provides a compelling case for action. With the S&P 500 supported by resilient earnings and favorable trade dynamics, now is the time to consider these vehicles for long-term growth.

**Source:[1] Touchstone US Large Cap Focused ETF, [https://www.westernsouthern.com/touchstone/etfs/us-large-cap-focused-etf][2] Q2 2025 Equity Market Observations - Intech Investments [https://www.intechinvestments.com/q2-2025-equity-market-observations/][3] 2nd Quarter 2025 Market Review | Thrivent [https://www.thriventfunds.com/insights/market-update/2nd-quarter-2025-market-review-stocks-plummeted-and-rebounded.html]