Portfolio returns: Q4 2024
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (Apr 19, 2022) |
IG Mackenzie U.S. Dollar Fund – Global Fixed Income Balanced F |
-1.56
|
-0.32
|
8.06
|
8.06
|
4.79
|
|||
Quartile rankings |
1 |
1 |
1 |
1 |
IG Mackenzie U.S. Dollar Fund – Global Fixed Income Balanced Series F
Portfolio commentary
Q4 2024
Highlights
① Fund returns were negative during the quarter primarily due to geopolitical and inflation risk concerns negatively affecting bonds.
② Positive equity returns helped offset negative bond returns.
③ Currency hedging was a major contributor to returns.
Portfolio overview
The IG Mackenzie U.S. Dollar Fund – Global Fixed Income Balanced generated a negative return as bond yields across the globe moved higher, placing pressure on bond prices.
In Q4 2024, global markets experienced mixed performance influenced by geopolitical developments, central bank actions and inflation concerns. The U.S. stock market soared in Q4 2024, as the S&P 500 extended its rally, buoyed by Donald Trump’s presidential victory and optimism about pro-business policies. However, expectations of fewer U.S. Federal Reserve (the Fed) rate cuts, raised inflation concerns from anticipation of higher government spending, and threats of tariffs triggered volatility across several asset classes.
Within this economic and market backdrop, the fund’s global equity mandate, representing 30% of the fund, produced a positive return in local terms. Stock selection within the energy sector added value to performance, however, selection in industrials and information technology stocks was a major detractor.
Within the fixed income allocation, the Mackenzie Core Plus Canadian Fixed Income ETF, with a 40% weight, posted a positive return. The fund outperformed its benchmark as an overweight allocation to corporate bonds and government bond selection bolstered performance.
The Mackenzie Core Plus Global Fixed Income ETF, which has a 30% allocation, produced a negative return, though the fund outperformed its benchmark. Corporate bonds selection, especially in the financials and industrials sectors, was the major contributor to this relative outperformance. An overweight allocation to the energy sector also bolstered performance.
Additionally, the fund’s currency hedging policy to U.S. dollars contributed to returns primarily as foreign currencies lost significant ground in Q4 2024.
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 Fed’s eagerness to cut rates on economic weakness supports the team’s view that the largest global economy is unlikely to enter a recession this year.
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.
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