Portfolio returns: Q4 2024
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (Apr 11, 2022) |
IG U.S. Taxpayer Portfolio – Global Fixed Income Balanced F |
-0.80
|
0.75
|
8.54
|
8.54
|
4.54
|
|||
Quartile rankings |
2 |
2 |
3 |
3 |
IG U.S. Taxpayer Portfolio – Global Fixed Income Balanced Series F
Portfolio commentary
Q4 2024
Highlights
① The IG U.S. Taxpayer Portfolio – Global Fixed Income outperformed its benchmark over the quarter, net of underlying ETF fees.
② Asset allocation decisions were strong contributors to performance, as were country tilts in U.S. equities.
③ We continue making procyclical positions around the global rebalancing theme in 2025 and seek to allocate to the most attractive countries and sectors within equities.
Portfolio overview
The IG U.S. Taxpayer Portfolio – Global Fixed Income Balanced outperformed its benchmark over Q4 2024.
Asset class positioning was positive over the quarter, driven by an overweight allocation to equities and an underweight allocation to fixed income. Within equities, country rotation was a strong contributor to performance. Overweight positions in Taiwan and the U.S. were additive over the quarter, while overweight positions in Sweden and Spain detracted as Europe experienced weaker growth over the quarter. Active positioning in U.S. equity sectors was slightly additive over the quarter. Within U.S. equity sectors, underweight allocations to the financials and industrials sectors detracted, while overweight allocations to the utilities and consumer discretionary sectors added to performance.
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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