Portfolio returns: Q4 2024
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (October 30, 2023) |
Canadian Neutral Balanced Series F |
-1.28
|
1.45
|
12.79
|
12.79
|
18.78
|
|||
Quartile rankings |
1 |
3 |
2 |
2 |
iProfile™ Enhanced Monthly Income Portfolio – Canadian Neutral Balanced Series F
Portfolio commentary
Q4 2024
Highlights
① The portfolio gained over the quarter, buoyed by a strong economic backdrop that supported global equities.
② Strong foreign equity returns were boosted by a weak Canadian dollar.
③ Bonds were modest contributors to returns.
Portfolio overview
Global equities marked a strong finish in Q4 2024, led by strong U.S. equity performance. Canadian equities also appreciated, as the Bank of Canada cut rates by 100 basis points over the quarter to stimulate a sluggish economy, but threats of U.S. tariffs on Canadian imports by President-elect Donald Trump were a headwind to performance.
The iProfile Enhanced Monthly Income Portfolio – Canadian Neutral Balanced, Series F, was up in the quarter. All its underlying funds produced positive returns except the iProfile International Equity Private Pool.
The iProfile U.S. Equity Private Pool, with an allocation of 14% in the portfolio, was the topmost contributor. The pool generated positive returns and outperformed its benchmark. Security selection in the financials sector and an overweight allocation to this sector was the major contributor. An underweight position in the real estate sector added value, and a strong U.S. dollar also significantly boosted returns.
With an allocation of 35%, the iProfile Canadian Dividend and Income Equity Private Pool was the second-highest contributor in the portfolio, though the fund underperformed its benchmark. Security selection in information technology stocks was a key reason for underperformance. In contrast, an overweight allocation to the financials sector and an underweight allocation to the materials and industrials sectors added value.
The Mackenzie – IG Canadian Bond Pool, the heaviest-weighted fund in the portfolio at 38%, was the third-highest contributor to returns. The fund produced a slight positive return and outperformed its benchmark. An overweight allocation to corporate bonds and government bond selection bolstered performance.
The iProfile International Equity Private Pool was the only detractor in the portfolio, following the path of negative returning international equity markets. However, the fund managed to outperform its benchmark primarily through security selection in the consumer staples and industrials sectors. Stock selection in the health care sector detracted from 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: positioning to benefit from expected rate cuts and diversify equity risk
The team believes that although global stock markets are expensive, valuations are not extreme. Continued U.S. government deficit spending and the eagerness of the U.S. Federal Reserve (the Fed) to cut rates on economic weakness supports the team’s view that the largest global economy is unlikely to enter a recession this year.
Duration exposure remains beneficial. While markets expect the Fed to only cut rates once or twice in 2025, the team believes they will need to cut at least three times to support the job market. Potential U.S. trade tariffs could cause a one-time effect on prices, but future inflation could be lower given that trade wars can depress economic growth. Some headwinds are expected in the Canadian economy, due to a deteriorating labour market and potential U.S. trade tariffs.
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