Portfolio returns: Q3 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 |
1.65 |
5.32 |
8.40 |
16.82 |
5.43 |
|||
Quartile rankings |
2 |
4 |
1 |
2 |
IG Mackenzie U.S. Dollar Fund – Global Fixed Income Balanced Series F
Portfolio commentary
Q3 2024
Highlights
① The fund gained over the quarter, buoyed by a strong economic backdrop that supported equity returns.
② Lower interest rates and strong returns from government and corporate bonds contributed to performance.
③ Financials stocks and bonds contributed significant returns.
Portfolio overview
The IG Mackenzie U.S. Dollar Fund – Global Fixed Income Balanced generated a positive return, benefiting from strong global equity markets and positive returning Canadian and global bond strategies, but underperformed its benchmark.
The U.S. stock market soared in Q3 2024, as the S&P 500 extended its rally, marking its best performance since 1997. The financials, utilities and real estate sectors led this growth. Corporate earnings in the information technology and consumer discretionary sectors rebounded sharply, boosting market optimism. Small-cap and value stocks also contributed to the upward momentum. However, job growth slowed, with the unemployment rate rising. Inflation eased, with CPI dropping below 3%, allowing the U.S. Federal Reserve (the Fed) to consider a 100-basis-point rate cut by year-end.
Within this economic and market backdrop, the fund’s global equity mandate, representing 30% of the fund, produced a positive return. Selection of information technology stocks, primarily from the U.S., added significant value to performance, as did selection in the consumer staples and materials sectors. Underweight exposure to the real estate and utilities sectors detracted from performance as those particular sectors performed extremely well.
Representing the fund’s 70% fixed-income allocation, the Mackenzie Core Plus Canadian Fixed Income ETF and the Mackenzie Core Plus Global Fixed Income ETF both produced positive returns. The Canadian ETF posted a positive return and benefited from a rise in bond prices as the Bank of Canada lowered interest rates to 4.25%. An overweight allocation to corporate bonds, security selection within the financials and energy sectors and an overweight allocation to government bonds also added value. The global ETF posted a positive return and benefited from corporate bond selection in the industrials and communication services sectors and security selection in government bonds.
The fund hedges its currency exposure back to the U.S. dollar. For Q3 2024, the foreign currencies appreciated against the U.S. dollar, leading to hedging detracting from performance.
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 diversification for longer-term stability
The team believes that while U.S. economic growth is slowing and the job market shows early signs of weakening, the U.S. is not entering a recession. High federal spending continues to boost growth, and anticipated federal funds rate cuts by the Fed should stabilize the labour market and the economy. Despite recent volatility, U.S. equities are supported by solid corporate earnings and the Fed’s dovish stance. The U.S. bond market is expected to benefit from rate cuts, with positive returns as yields decline and prices rise.
The team sees increased benefits in duration exposure due to expected rate cuts by developed central banks. Given high global equity valuations, they favour diversifying into more affordable markets with positive economic catalysts, such as Europe and Asia. They emphasize maintaining a well-diversified portfolio to manage risk and achieve long-term financial stability.
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