Portfolio returns: Q4 2024
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (Jul 12, 2013) |
IG Income – Series F |
-0.51 |
1.15 |
9.57 |
9.57 |
2.75 |
3.45 |
3.74 |
4.11 |
Quartile rankings |
1 |
2 |
2 |
2 |
1 |
2 |
2 |
IG Income Portfolio Series F
Portfolio commentary
Q4 2024
Highlights
① The portfolio gained over the quarter, buoyed by a strong economic backdrop that supported global equities and the portfolio’s fixed income positioning.
② U.S. equities performance was the primary contributor to returns.
③ Bonds were a modest detractor to returns.
Portfolio overview
The portfolio was up in the quarter. All funds within the portfolio generated positive returns.
Equities exposure, represented by the portfolio’s 34% allocation to the Mackenzie Global Equity Income Fund, was the largest contributor to performance. Relative to its benchmark, the fund modestly underperformed. Returns were driven by U.S. equity stocks, primarily from the fund’s 40% allocation to the S&P 500. The fund’s dividend-generating focus also produced positive returns but lagged broader markets, which adopted a risk-on stance that favoured lower-quality and higher-volatility stocks. The fund also utilizes a stock options strategy, designed to hedge equity risk and help preserve capital during times of severe equity market stress. It contributed positively to performance this quarter.
The Mackenzie Canadian Bond Fund, representing 21% of the portfolio, was the top returning fixed income fund in the portfolio. The fund also outperformed its benchmark, as an overweight allocation to corporate bonds and government bond selection bolstered performance.
The Mackenzie Sovereign Bond Fund, representing 12% of the portfolio, was the top detractor in the portfolio. The fund holds 10-year government bonds across the globe and was negatively impacted by rising yields, which tended to be higher at the longer end of yield curves.
Market overview: the U.S. dollar and equities dominated the quarter
Investor sentiment turned optimistic in the fourth quarter of 2024, as equities rallied to close the year on a high note. Three defining themes shaped the quarter: a historic U.S. presidential election, ongoing central bank rate cuts and a rise in political risks both domestically and abroad. Collectively, these factors drove market movements, creating an optimistic and rewarding environment for investors following the decisive U.S. election.
Global central banks continued to ease their monetary policies, shifting the focus from combating inflation to supporting economic growth and labour market stability. The Bank of Canada (BoC) cut its overnight rate twice by 50 basis points (half a percentage point) each time, for a total reduction of one percentage point during the quarter, bringing the overnight rate to its lowest level in over two years. Similarly, the U.S. Federal Reserve followed its September cut with two consecutive reductions of one-quarter percentage point each.
Market outlook: positioning to benefit from expected rate cuts and diversify equity risk
The team believes that although global stock markets are expensive, valuations are not extreme. Continued U.S. government deficit spending and the eagerness of the U.S. Federal Reserve (the Fed) to cut rates on economic weakness supports the team’s view that the largest global economy is unlikely to enter a recession this year.
Duration exposure remains beneficial. While markets expect the Fed to only cut rates once or twice in 2025, the team believes they will need to cut at least three times to support the job market. Potential U.S. trade tariffs could cause a one-time effect on prices, but future inflation could be lower given that trade wars can depress economic growth. Some headwinds are expected in the Canadian economy, due to a deteriorating labour market and potential U.S. trade tariffs.
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