Portfolio returns: Q3 2024
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (Jul 12, 2013) |
IG Growth Portfolio – Global Equity Balanced F |
2.44 |
6.08 |
16.95 |
27.05 |
7.18 |
7.86 |
7.00 |
7.58 |
Quartile rankings |
1 |
1 |
1 |
1 |
1 |
2 |
2 |
IG Growth Portfolio – Global Equity Balanced 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 equities were the primary contributors to returns, followed by U.S. equities.
③ Canadian equities rebounded on Bank of Canada rate cuts and improved global market sentiment.
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 were key contributors 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 Growth Portfolio – Global Equity Balanced generated a positive return this quarter. The portfolio’s equity allocation was the leading contributor to portfolio returns, followed by fixed income.
The Mackenzie Canadian Equity Pool, the Mackenzie U.S. Equity Pool and the Mackenzie EAFE Equity Pool were the largest contributors. 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 U.S. Equity Pool posted a positive return and outperformed its benchmark, with an underweight allocation to the information technology sector and security selection in health care sector stocks as the largest contributors. 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 during the period, but the Mackenzie North American Corporate Bond Fund was the smallest contributor owing to its modest allocation. The Mackenzie North American Corporate Bond Fund generated a positive return but slightly underperformed its benchmark, with duration management of industrials sector corporate bonds as the largest detractor. Conversely, security selection in communication services sector corporate bonds was the largest contributor.
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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