Portfolio returns: Q3 2024
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. July 12, 2013 |
IG Core Portfolio – Income Plus F |
2.06 |
5.32 |
9.01 |
16.30 |
2.96 |
3.68 |
3.71 |
4.17 |
Quartile rankings |
1 |
2 |
1 |
2 |
2 |
2 |
2 |
IG Core Portfolio – Income Plus Series F
Portfolio commentary
Q3 2024
Highlights
① The portfolio gained over the quarter as central-bank easing benefited global equities and fixed- income markets.
② Canadian bonds were the primary contributors to returns, followed by Canadian equities.
③ Canadian bonds and equities benefited from Bank of Canada rate cuts and an improved global market.
Portfolio overview
While investors were taken for a ride during the quarter on bouts of heightened volatility, global equities and fixed-income markets finished in the green. A 50-basis-point cut by the U.S. Federal Reserve (the Fed) in September and market expectations of further easing was a key contributor to gains in both asset classes. There was also a notable rotation in equity market leadership, with value-oriented sectors such as utilities pushing markets ahead while growth-oriented sectors such as information technology lagged behind. Canadian equities benefited from continued Bank of Canada rate cuts and strong global markets. In other areas of the world, new economic stimulus out of China and a less hawkish tone from Japanese policymakers provided further support to investor sentiment.
Developed market equities returned 6.0% (MSCI EAFE Index CAD), U.S. equities returned 4.5% (S&P 500 Index CAD), Canadian equities returned 10.5% (S&P/TSX Composite Index), global bonds returned 4.0% (Bloomberg Barclays Global Aggregate Bond Index CAD-Hedged), Canadian bonds returned 4.7% (FTSE Canada Universe Bond Index) and high-yield bonds returned 5.0% (ICE BofA U.S. High Yield Bond Index CAD-Hedged).
IG Core Portfolio – Income Plus generated a positive return this quarter. The portfolio’s fixed-income allocation was the leading contributor to portfolio returns, followed by equities.
The Mackenzie – IG Canadian Bond Pool, the Mackenzie Canadian Equity Pool and the Mackenzie EAFE Equity Pool were the largest contributors. The Mackenzie – IG Canadian Bond Pool posted a positive return and outperformed its benchmark, benefiting from duration management and security selection in corporate bonds. The Mackenzie Canadian Equity Pool posted a positive return but slightly underperformed its benchmark, with an overweight allocation to the energy sector and security selection in the health care sector as the largest detractors. Conversely, security selection in the materials sector was a leading contributor. The Mackenzie EAFE Equity Pool posted a positive return and outperformed its benchmark, with security selection in the financials and industrials sectors as the largest contributors.
There were no detractors over the period, but the Mackenzie Global Macro Fund was the smallest contributor given it was among the smaller weighted allocations as traditional equity and fixed-income assets flourished. The Mackenzie Global Macro Fund is a broadly diversified multi-asset alternative strategy focused on generating absolute returns. The investment team uses the fund to enhance portfolio diversification and generate returns that can complement traditional equity and fixed-income strategies.
Market overview: markets rallied with expanding breadth
Investor sentiment shifted to a “risk-on” attitude in the third quarter, in response to changes in central bank monetary policy across key economies. It began with the Bank of Canada (BoC) and the European Central Bank (ECB) in the second quarter and continued into the third. The BoC was particularly active, making two additional cuts of 25 basis points (0.25 percentage points) to its overnight rate this quarter.
The U.S. Federal Reserve (the Fed) started its own policy easing with a surprise 50 basis-point (0.5-percentage-point) cut in mid-September, launching rallies in both bonds and equity markets. The Fed noted an increase in the unemployment rate and that the battle against inflation was no longer a primary reason to maintain a restrictive monetary policy.
Market outlook: duration becomes more attractive, but it is too soon to bet against equities
The portfolio management team believes that although U.S. economic growth is moderating, with the job market showing early but convincing signs of deterioration, the U.S. is not in the early stages of a recession. Federal government spending is still high, boosting growth, and the team believes additional cuts to the federal funds rate by the Fed would stabilize the downward trend of the labour market and the economy.
In anticipation of further interest-rate cuts by developed central banks, the team believes duration exposure (sensitivity to interest rates) has become more beneficial. Given expensively valued global equities, the team favours diversifying into cheaper markets with positive economic catalysts, such as Europe and Asia. The team believes that maintaining a well-diversified investment portfolio is crucial for managing risk and achieving long-term financial stability.
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