Portfolio returns: Q4 2024
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (Jan 30, 2023) |
IG Target Education 2030 Portfolio F |
-0.85
|
2.73
|
15.34
|
15.34
|
11.63
|
|||
Quartile rankings |
3 |
1 |
1 |
1 |
IG Target Education 2030 Portfolio Series F
Portfolio commentary
Q4 2024
Highlights
① The IG Target Education 2030 Portfolio outperformed its benchmark over the quarter, net of underlying fund and ETF fees.
② Asset allocation positioning was additive to returns, as well as the country tilts and sector positioning.
③ Manager selection detracted from returns over the period, particularly from the T. Rowe Price – IG U.S. Equity Pool.
Portfolio Overview
The IG Target Education 2030 Portfolio outperformed its benchmark over the quarter. Asset allocation positioning was additive over the period, while manager selection detracted.
Asset allocation positioning was additive in the portfolio over the quarter. We maintained an overweight equity position, and we continued to be underweight duration. Sector positioning in U.S. equities was positive over the quarter. An overweight position in the consumer discretionary sector and an underweight position in the health care sector were additive, while an underweight position in the financials sector detracted. Country positioning was also additive. Within equities, overweight allocations to Taiwan and the U.S. were additive to performance, while overweight allocations to Spain and Sweden detracted as growth was slower in the Eurozone over the quarter. Manager selection weighed on returns over the period. An allocation to the T. Rowe Price – IG U.S. Equity Pool detracted as the fund underperformed its benchmark.
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: new year, new administration, new macro drivers
The new year looks set to bring a new administration and new macro drivers of markets to the forefront of investors’ minds. In particular, we perceive that the incoming administration’s focus on the global rebalancing of trade – and the associated implications for asset prices – will become a key topic for investors to assess in 2025. From a shorter-term perspective, financial conditions initially eased post-election as investor behaviour more closely resembled 2021 rather than 2016 with many market participants more focused on memecoins than the macroeconomic tradeoffs that will likely characterize 2025. We believe this exuberance has become stretched in the near-term and anticipate that financial conditions will revert to a tighter level as market attention shifts back to the policy choices that will need to be made in Q1 2025. These include the inherent tensions between attaining policymakers' desired outcomes and reducing both fiscal deficits and the trade balance, sustaining growth, weakening the dollar, slowing immigration, and taming inflation, to name but a few.
We remain procyclically positioned with the bulk of our active risk expressed in underweight longer-dated fixed income assets. We increased the size of this position following the election and feel that higher longer-term bond yields will likely drive a reversal of some of the loosening in financial conditions that was observed prior to the December U.S. Federal Reserve (the Fed) meeting – particularly against a backdrop of strong nominal economic growth.
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