Portfolio returns: Q3 2024
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (Jan 30, 2023) |
IG Target Education 2035 Portfolio F |
1.78 |
5.25 |
15.15 |
24.09 |
14.21 |
|||
Quartile rankings |
4 |
4 |
1 |
1 |
IG Target Education 2035 Portfolio Series F
Portfolio commentary
Q3 2024
Highlights
① The Target Education 2035 Portfolio underperformed its dynamic glidepath benchmark over the quarter, net of underlying fund and ETF fees.
② Stock-bond positioning was additive to returns, while country and sector positioning had negative contributions to performance.
③ Manager selection was detractive to returns over the period, particularly from the T. Rowe Price U.S. Equity Pool and the Fidelity Canadian Equity Pool.
Portfolio overview
The IG Target Education 2035 Portfolio underperformed its benchmark over the quarter. Tactical asset allocation positioning detracted over the period, as did manager selection.
Stock-bond positioning was additive in the portfolio over the quarter. We maintained an overweight equity position, which was additive particularly in the later part of the quarter, and we continued to be underweight duration. Within U.S. equities, sector positioning in U.S. equities was negative over the quarter. An overweight allocation to the communication services sector was a positive contributor, while an underweight allocation to the utilities sector detracted. Country positioning was negative. Overweight allocations to Italy, Japan and Taiwan were the primary contributors to returns over the period, while underweight allocations to Canada, the U.S., and Germany detracted. Manager selection weighed on returns over the period. Allocations to the Fidelity IG Canadian Equity Pool as well as the T. Rowe Price IG U.S. Equity Pool were detractive as both funds underperformed their benchmarks.
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: easing cycle in key economies
The third quarter of 2024 saw a mixed global economic landscape, characterized by a combination of resilient consumer spending and a softening, but still strong, labour market in key economies. Global equities generally performed well over the quarter, despite a few volatility events. On the fixed-income side, major economies continued or started interest-rate-cutting cycles. In the U.S., the labour market showed signs of loosening, with rising unemployment rates and softer payroll gains. Despite this, consumer spending remained robust, supported by strong retail sales and personal consumption expenditures. The U.S. Federal Reserve (the Fed) used the weakening labour market data as a basis to initiate a rate-cutting cycle, starting with a 50-basis point cut. In the Eurozone, economic growth remained tepid, with the European Central Bank (ECB) continuing its gradual easing cycle. Inflation in the Eurozone showed signs of moderation, particularly in services, as global disinflationary pressures persisted. In Asia, equity markets generally performed well apart from economies like South Korea and Taiwan that are particularly exposed to the artificial intelligence (AI) trend. China's economy exhibited a return to trend growth in the second half of the year, however, persistent weakness in the property market and subdued manufacturing sentiment continued to weigh on overall economic performance. Japan continued to shift monetary policy with a return to positive interest rates and the second hike in 17 years.
Economic growth is realizing a more robust pace than many sources of survey data suggest: the Fed has endorsed a loosening of financial conditions back to 2021 levels; fiscal policy remains a tailwind; and there are signs that underlying price stability progress has already stalled solidly above central bank targets. Given this policy backdrop, asset prices should place incrementally more probability on outcomes in which inflation remains persistent and reflation unfolds rather than embedding even greater expectations of a soft landing.
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