Portfolio returns: Q3 2024
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (October 30, 2023) |
Canadian Fixed Income Balanced Series I |
2.08 |
5.38 |
8.68 |
17.35 |
||||
Quartile rankings |
1 |
1 |
2 |
iProfile™ Enhanced Monthly Income Portfolio – Canadian Fixed Income Balanced Series I
Portfolio commentary
Q3 2024
Highlights
① The portfolio gained over the quarter, buoyed by a strong economic backdrop that supported both equity and bond returns.
② Canadian bond returns were boosted by falling interest rates.
③ Canadian equities contributed to a strong performance led by the health care and real estate sectors.
Portfolio overview
In Q3 2024, the Canadian economy saw modest growth, with early signs of a slowdown prompting expectations for further rate cuts. Despite these challenges, the economy showed resilience with decreasing inflation, a strong labour market and increased purchasing power for Canadians.
The iProfile Enhanced Monthly Income Portfolio – Canadian Fixed Income Balanced, Series I, was up in the quarter. All six of its underlying funds produced positive returns.
The Mackenzie – IG Canadian Bond Pool, the heaviest weighted fund in the portfolio at 65%, was the top returning fixed-income fund. The Bank of Canada lowered interest rates to 4.25%, easing borrowing costs amid slowing growth and lower inflation, which resulted in higher bond prices. The pool additionally outperformed its benchmark, as an overweight allocation to corporate bonds and security selection within the financials and energy sectors added value.
With an allocation of 14%, the iProfile Canadian Dividend and Income Equity Private Pool was the second-highest contributor in the portfolio. Canadian equities hit record highs, with strong performances from the financials, real estate and health care sectors. Security selection in the health care and industrials sectors were primary reasons the pool outperformed its benchmark. Also, an overweight allocation to the financials sector and an underweight allocation to the industrials sector contributed to performance.
The iProfile U.S. Equity Private Pool, with an allocation of 11% in the portfolio, was another top contributor. The pool generated positive returns but lagged its benchmark for the period as stock selection in the financials, information technology and consumer discretionary sectors detracted. Conversely, stock selection in the consumer staples sector and an overweight allocation to the financials 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: strategic diversification for stability
The portfolio management team believes that although U.S. economic growth is moderating, with the job market showing early signs of deterioration, the U.S. is not in a recession. Federal government spending remains high, boosting growth. The team believes additional cuts to the federal funds rate by the U.S. Federal Reserve (the Fed) would stabilize the labour market and the economy.
However, signaling rate cuts can loosen financial conditions, push stock prices higher and tighten credit spreads, increasing growth and inflation pressures.
In anticipation of further interest-rate cuts by developed central banks, the team sees duration exposure as beneficial. Given expensively valued global equities, the team favours diversifying into cheaper markets with positive economic catalysts, such as Europe and Asia. Maintaining a well-diversified investment portfolio is crucial for managing risk and achieving long-term financial stability.
To discuss your investment strategy, speak to your IG Advisor.
Commissions, fees and expenses may be associated with mutual fund investments. Read the prospectus and speak to an IG Advisor before investing. The rate of return is the historical annual compounded total return as of September 30, 2024, including changes in value and reinvestment of all dividends or distributions. It does not take into account sales, redemption, distribution, optional charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, values change frequently, and past performance may not be repeated. Mutual funds and investment products and services are offered through Investors Group Financial Services Inc. (in Québec, a Financial Services firm). Any additional investment products and brokerage services are offered through Investors Group Securities Inc. (in Québec, a firm in Financial Planning). Investors Group Securities Inc. is a member of the Canadian Investor Protection Fund.
This commentary may contain forward-looking information which reflects our or third-party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and do not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of September 30, 2024. There should be no expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.
This commentary is published by IG Wealth Management. It represents the views of our Portfolio Managers and is provided as a general source of information. It is not intended to provide investment advice or as an endorsement of any investment. Some of the securities mentioned may be owned by IG Wealth Management or its mutual funds, or by portfolios managed by our external advisors. Every effort has been made to ensure that the material contained in the commentary is accurate at the time of publication, however, IG Wealth Management cannot guarantee the accuracy or the completeness of such material and accepts no responsibility for any loss arising from any use of or reliance on the information contained herein.
Trademarks, including IG Wealth Management and IG Private Wealth Management, are owned by IGM Financial Inc. and licensed to subsidiary corporations.
© Investors Group Inc. 2024