Portfolio returns: Q3 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 |
1.43 |
4.31 |
7.73 |
15.38 |
4.69 |
|||
Quartile rankings |
4 |
4 |
3 |
3 |
IG U.S. Taxpayer Portfolio – Global Fixed Income Balanced Series F
Portfolio commentary
Q3 2024
Highlights
① The IG U.S. Taxpayer Portfolio – Global Fixed Income Balanced underperformed its benchmark over the quarter, net of underlying ETF fees.
② Underperformance was mainly driven by country rotation within equities.
③ We maintain a positive view on global reflationary dynamics 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 had positive total returns over Q3 2024, but underperformed its benchmark.
An overweight allocation to equities was positive in the third quarter, given the strong performance for global equities later in the quarter. Country selection within equities was the primary detractor to performance. Within equities, overweight allocations to Taiwan and Italy have been additive to performance, while the underweight allocations in Canada and Switzerland weighed on performance. Active positioning in U.S. equity sectors was slightly additive over the quarter. Within U.S. equity sectors, an underweight position in the utilities sector detracted from performance, while an underweight position to the technology sector added to 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: 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 (the 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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