Portfolio returns: Q1 2024
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (Jul 12, 2013) |
IG Managed Payout Portfolio with Enhanced Growth F |
1.33 |
2.79 |
2.79 |
7.07 |
3.86 |
4.32 |
4.43 |
5.05 |
Quartile rankings |
4 |
4 |
4 |
4 |
2 |
3 |
3 |
IG Managed Payout Portfolio with Enhanced Growth Series F
Portfolio commentary
Q1 2024
Highlights
① The portfolio gained over the quarter, buoyed by a strong economic backdrop that supported global equities but led to some weakness in global fixed income markets.
② Strong performance from U.S. equities was the primary contributor to returns.
③ Bonds generally detracted as the anticipated number of interest rate cuts by the Federal Reserve continues to be pushed out into the future.
Portfolio Overview
It was a positive quarter for equity investors, helped by resilient economic data in the U.S. coming in stronger than initially expected, benefiting global equities overall. However, it was a more challenging period for fixed income investors, with sticky inflation and strong economic growth shifting expectations for interest rate cuts by the Federal Reserve down to three instead of the six forecasted at the start of the year, putting pressure on bond prices as yields climbed.
IG Managed Payout Portfolio was up in the quarter. Within equities, the Mackenzie Global Equity Income Fund was the largest weighted allocation in the portfolio and the largest contributor to performance. Relative to its benchmark, the fund underperformed. The options strategy, designed to reduce drawdowns when equity markets are stressed, detracted from performance as equity markets rallied. Security selection in the financials and materials sectors also detracted from relative performance. The portfolio’s position in gold contributed positively to performance.
Within fixed income, the Mackenzie Unconstrained Fixed Income Fund contributed positively to performance. It was the largest weighted fixed income allocation in the portfolio. It posted positive returns in the quarter and outperformed its benchmark. Security selection in corporate bonds and duration management in government bonds contributed the most to relative performance. On the contrary, duration management in corporate bonds detracted.
Mackenzie Canadian Bond Fund was the second-largest fixed income allocation in the portfolio and the largest detractor from portfolio returns. Relative to its benchmark, the fund outperformed slightly. Duration management in government bonds detracted the most from performance. Mackenzie Sovereign Bond Fund also detracted. It underperformed its benchmark primarily due to currency exchange.
Market overview: Leap year liftoff – Q1's market highs.
In the first quarter, equity markets delivered a solid performance, reinforcing the sentiment that inflation is nearly under control and recession fears for the U.S. economy are subsiding.
The U.S. maintained a positive economic outlook, whereas Canada has experienced several months of subdued GDP growth, highlighting divergent economic narratives between the two closely linked markets. This contrast may lead the Bank of Canada to enact policy changes before the U.S. Federal Reserve, to address Canada's specific economic hurdles.
Market outlook: Continued U.S. economic resilience reduces urgency for rate cuts
The team believes that Q1 GDP growth in the U.S. will continue the up trend from 2023 and reduce the Federal Reserve’s urgency in initiating rate cuts. The team does not see inflation stabilizing at 2% over the next few months given the uptick in various inflation measures and continued strength of the U.S. economy. The team thinks the Federal Reserve will err towards keeping rates tighter than what classic monetary policy would suggest.
The situation in Canada appears more dire than in the U.S. With both headline and core inflation rates in Canada collapsing below 2% on a three-month annualized basis, the team believes that the Bank of Canada will be ready for cuts soon and will do so at a steady pace and get back to neutral in 2025. The team believes that population growth and government deficits will keep pressure on long-term yields, but the yield curve will steepen.
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