Portfolio returns: Q1 2024
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (Aug 9, 2021) |
iProfile Portfolio – Global Neutral Balanced F |
1.98 |
4.79 |
4.79 |
10.43 |
2.77 |
|||
Quartile rankings |
2 |
2 |
2 |
3 |
iProfile™ Portfolio – Global Neutral Balanced Series F
Portfolio commentary
Q1 2024
Highlights
① The portfolio had a solid start to 2024 due to strong global equity markets.
② Central banks face divergent monetary policies.
③ Market momentum and encouraging economic data point to more upside potential in 2024.
Portfolio Overview
The iProfile™ Portfolio – Global Neutral Balanced, Series F, rose over the period (4.8%) and outperformed its global neutral balanced peer group median (4.6%), as stocks gained ground in most regions.
Most long-term bond indices lost ground as yields rose in most regions (bond prices fall as yields rise). Stocks pushed higher as solid economic growth in the U.S. shifted the consensus view of the U.S. economy from gliding down for a “soft landing” to a growing belief that the U.S. won’t experience any meaningful slowdown at all. Meanwhile, the U.S. Federal Reserve reaffirmed that interest rate tapering would happen “fairly soon”. Most other central banks, including the Bank of Canada and the European Central Bank, also remained on the sidelines. In contrast, the Bank of Japan raised its rates for the first time since 2007 during the period, ending the world’s last remaining negative interest rate policy. Nonetheless, Japanese yields rose in tandem with those elsewhere.
Equity returns were especially strong in the U.S. (13.3%), led by stocks in the communication services (18.7%), energy (16.5%) and information technology (15.5%) sectors. EAFE (8.5%), Canada (6.6%) and emerging markets (4.7%) all underperformed the U.S. In this environment, gains in the portfolio came mostly from constituents that contained substantial U.S. equity content. In addition to the iProfile U.S. Equity Private Pool (13.5%), these included the iProfile ETF Private Pool (11.3%) and the iProfile Low Volatility Private Pool (8.2%). In the U.S. equity pool, six of the seven sub-advisors (all but the small-cap segment) delivered double-digit percentage returns, benefitting mostly from stock selection in the consumer discretionary (especially in the automobiles and auto components groups) and information technology (semiconductors) sectors. The iProfile Active Allocation Private Pool II (5.9%) and iProfile Canadian Equity Private Pool (5.7%) were also significant contributors, due in part to their significant weight allocations in the portfolio.
The iProfile Fixed Income Private Pool was the weakest portfolio component (0.2). Although several elements of the Pool (for example, high yield bonds and the IG Mackenzie Real Property Fund) had solid gains, the fixed income pool performance was dampened by its significant allocation to Canadian bonds, which declined over the period. The iProfile Alternatives Private Pool (4.3%) and the iProfile Emerging Markets Private Pool (4.8%) also lagged.
*Sources:
- All returns in Canadian dollars.
- CIFSC peer category performance as per Lipper (Refinitiv).
- Canadian equity return = S&P/TSX Composite Index Total Return.
- U.S. equity market return = S&P 500 Index Total Return, Canadian dollars.
- EAFE market return = MSCI EAFE Index Total Return (net), Canadian dollars.
- Emerging markets return = MSCI Emerging Markets Index Total Return (net), Canadian dollars.
Market overview: Leap year liftoff – Q1's market highs.
In the first quarter, equity markets delivered a solid performance, reinforcing the sentiment that inflation is nearly under control and recession fears for the U.S. economy are subsiding.
The U.S. maintained a positive economic outlook, whereas Canada has experienced several months of subdued GDP growth, highlighting divergent economic narratives between the two closely linked markets. This contrast may lead the Bank of Canada to enact policy changes before the U.S. Federal Reserve, to address Canada's specific economic hurdles.
Market outlook: exceptionally strong quarter leads to investor confidence.
As we look ahead, the market's optimism has notably improved from six months ago. U.S. equity markets appear to be priced to perfection, and continued positive economic news is essential to support valuations in the near term. Canadian markets, meanwhile, have been riding the surging wave of global crude prices. This boon from the energy sector is bolstering the country's economic and stock market performance, providing a buffer that could mitigate the impact of a sluggish consumer sector, should higher oil prices persist.
Internationally, markets are on the upswing, rallying from a period of low stock valuations and slow manufacturing. Historically, these signs have often led to a phase of strong economic growth.
We’re encouraged by the momentum in the markets and inflection points in the economic data to the upside, and that leaves us with an optimistic view for investors through the remainder of 2024.
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