Portfolio returns: Q1 2024
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. July 12, 2013 |
IG Core Portfolio – Growth F |
3.30 |
10.39 |
10.39 |
20.94 |
8.68 |
10.03 |
8.62 |
9.64 |
Quartile rankings |
1 |
2 |
2 |
2 |
2 |
2 |
2 |
IG Core Portfolio – Growth Series F
Portfolio commentary
Q1 2024
Highlights
① The portfolio had a solid start to 2024 due to strong global equity markets.
② U.S. equities led portfolio gains.
③ International small caps were weakest.
Portfolio Overview
IG Core Portfolio – Growth rose (+10.4%) over the period and outperformed its global equity peer group (+9.5), mainly due to the strong performance of its largest U.S. equity component. All portfolio component pools and funds were higher as stocks gained ground in most regions.
Stocks pushed higher as solid economic growth in the U.S. shifted the consensus view of the U.S. economy from gliding down for a “soft landing” to a growing belief that the U.S. won’t experience any meaningful slowdown at all. Meanwhile, the U.S. Federal Reserve reaffirmed that interest rate tapering would happen “fairly soon”. Most other central banks, including the Bank of Canada and the European Central Bank, also remained on the sidelines. In contrast, the Bank of Japan raised its rates for the first time since 2007 during the period, ending the world’s last remaining negative interest rate policy.
Equity returns were especially strong in the U.S. (+13.3%), led by stocks in the communication services (18.7%), energy (16.5%) and information technology (+15.5%) sectors. EAFE (+8.5%), Canada (+6.6%) and emerging markets (+4.7%) all underperformed the U.S.
In this environment, gains in the portfolio came mostly from the strong performance of some of its U.S. equity segments. T. Rowe Price -- IG U.S. Equity Pool was the best-performing constituent and top contributor to overall portfolio results, outperforming the S&P 500 Index mostly due to its stock selection in the information technology sector. Mackenzie -- IG U.S. Equity Pool had double-digit percentage returns but slightly lagged the S&P 500. BlackRock -- IG Active Allocation Pool IV was also among the top contributors to absolute returns, mainly because of its relatively high allocation in the portfolio (almost 10% of the portfolio). However, its performance lagged many major equity market indices, mainly due to its overweight exposure to Canadian equities.
IG Mackenzie International Small Cap Fund was the poorest-performing component of the portfolio as international markets underperformed the U.S. and small-cap stocks underperformed large caps in all regions. The fund further underperformed the MSCI EAFE Small Cap Index (5.1%) mainly due to stock selection in Japan and in the consumer discretionary sector. Emerging markets exposure also weighed on overall results. However, the portfolio’s holding of JPMorgan -- IG Emerging Markets Pool II (+5.7%) outperformed the emerging markets benchmark.
Market overview: Leap year liftoff – Q1's market highs.
In the first quarter, equity markets delivered a solid performance, reinforcing the sentiment that inflation is nearly under control and recession fears for the U.S. economy are subsiding.
The U.S. maintained a positive economic outlook, whereas Canada has experienced several months of subdued GDP growth, highlighting divergent economic narratives between the two closely linked markets. This contrast may lead the Bank of Canada to enact policy changes before the U.S. Federal Reserve, to address Canada's specific economic hurdles.
Market outlook: Stronger growth and lower interest rates expected to boost equities.
We have seen a transition from an environment dominated by slower growth and slower inflation to higher growth and slower inflation. This has led to improved equity return expectations. The macro data suggests that economic growth could continue through the first half of 2024, while inflation is expected to remain in the 2-3% range through most of 2024. As inflation has peaked, so too have central bank policy rates (except in Japan). The next move for most central banks will be a cut in policy rates. This will likely occur starting in Q2.
In the U.S., valuation and earnings potential has led to a favourable outlook for US equities in 2024. Conditions in international and emerging market economic conditions also appear to be improving. However, Canadian equities may be weighed down by relatively weaker earnings growth with limited valuation upside.
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