Portfolio returns: Q3 2024
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (Jul 13, 2015) |
IG Low Volatility Portfolio – Income Balanced F |
1.96 |
5.85 |
12.99 |
20.56 |
5.61 |
6.32 |
5.83 |
|
Quartile rankings |
2 |
1 |
1 |
2 |
1 |
2 |
IG Low Volatility Portfolio – Income Balanced Series F
Portfolio commentary
Q3 2024
Highlights
① The portfolio gained over the quarter, as the global economy continued to grow at a moderate pace, benefiting global equities and longer-dated bonds.
② Our allocation to Canadian equities – both cap weighted and low volatility – has contributed to value.
③ We continue to favour equities over fixed income.
Portfolio overview
The third quarter was notable for financial markets. U.S. fixed income, especially longer-dated bonds, posted mid to high single-digit returns due to cooling employment data and disinflation in core goods. U.S. equities were volatile, influenced by disappointing economic data and a stronger yen, leading to a rapid unwinding of the carry trade. Despite this, the market recovered quickly, achieving a 4.6% gain. Unlike the first half of the year, the third quarter favoured greater diversification across sectors and countries, with U.S. technology stocks underperforming. In contrast, Canadian stocks and global low-volatility equities attracted higher investor interest. Gold outperformed both stocks and bonds, driven by heightened equity market volatility, lower interest-rate expectations and strong demand from global central banks.
Developed market equities returned 5.0% (MSCI All Country World Index), international equities returned 7.3% (MSCI EAFE Index), U.S. equities returned 5.9% (S&P 500 Index), 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 Low Volatility Portfolio – Income 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 – IG Low Volatility Canadian Equity Pool Fund, the Mackenzie Canadian Dividend Fund and the Mackenzie – IG Equity Pool were the largest contributors. The Mackenzie – IG Low Volatility Canadian Equity Pool Fund posted a positive return but slightly underperformed its benchmark. The fund benefited from an overweight allocation to the health care sector. Stock selection in the information technology and energy sectors was a leading detractor to the relative underperformance of the fund. The Mackenzie Canadian Dividend Fund outperformed its benchmark with stock selection in the energy sector and an overweight allocation to the industrials sector being the major contributors. The Mackenzie – IG Equity Pool performed relatively in line with its benchmark. An underweight allocation to the information technology sector with security selection in the energy sector contributed to relative outperformance.
There were no detractors over the period, but the IG Mackenzie Real Property Fund was the weakest contributor. The fund’s quarterly performance was stable due to strong operating metrics and high tenant retention, but it was impacted by the underperformance of office properties with rising vacancy rates and competitive rental pressures.
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: strategic shifts amid positive market sentiment Q3
In Q3 2024, bonds outperformed amid cooling U.S. employment data and disinflation in core goods, with longer-dated bonds posting mid to high single-digit returns. U.S. stocks were volatile but gained 4.6%, with diversification across sectors and countries proving beneficial. Canadian stocks and global low-volatility equities saw increased interest. Equities overall had a strong quarter, driven by a dovish pivot by the U.S. Federal Reserve (the Fed) and China’s significant stimulus package.
We shifted from gold to fixed income, favouring Canadian bonds over foreign ones due to rate differentials. With easing inflation, we moved from the inflation-linked pool to the global bond pool and increased beta to global stocks while maintaining a defensive tilt.
We favour equities over fixed income, expecting near-term volatility but anticipating improved risk sentiment post-U.S. election and with central bank support.
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