Issue #50 – Q2 Top Holdings Reports

2017 is proving to be quite an eventful year for investors, despite the relatively flat equity markets in North America.  For this month’s IMI, we present you with a snapshot of each market segment and their performance as well as the year-to-date performance figures from our major allocations.



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MARKET DATA

 

Level

YTD(C$)

 

Level

YTD(C$)

Toronto (S&P/TSX)

15182

-0.7%

New York (S&P500)

2423

+4.4%

EAFE (MSCI)

1883

+7.9%

Emerging  (MSCI)

1011

+13.1%

Oil - WTI (US$/bbl)

46.04

-14.3%

Gold (US$/troy oz)

1241.5

+7.7%

CAD to USD

0.7714

+3.7%

Cdn Bonds - FTSE

1035

+2.4%

Canadian Equity

The S&P/TSX, Canada’s most widely cited index, has had a difficult year so far and is down almost 1% for the year.  This drop is overwhelmingly due to the energy sector which is down almost 15% year-to-date as a result of falling crude oil and natural gas prices.  The sector as a whole is feeling the pinch of lowered consumer demand thanks to better fuel efficiency, while shale gas production continues unabated, resulting in excess supply.

For clients with exposure to the Canadian equity market, the BMO Canadian Low Volatility ETF, has performed admirably with a +6.27% return in the first 6 months of the year.  This security was selected specifically because of its low exposure to oil & gas, materials, and financials.

Canadian Bonds

Stephen Poloz, Governor of the Bank of Canada, surprised the markets by signaling that a rise in Canadian interest rates was imminent.  This announcement sent the loonie up and bond prices down.  Adding fuel to the fire, market traders began dumping Canadian bonds in favour of US treasury notes, betting that the Federal Reserve would slow the pace of its interest rate increase.  

Combined, these two factors contributed to making Canadian bonds the worst performing developed market sovereign debt with the Canadian bond universe giving back most of its year-to-date gains.

Our own exposure to fixed income is rather limited as we would rather see clients allocate resources to cash positions rather than bonds.  The run on Home Capital forced second-tier lenders to increase the interest paid on savings and so our preferred cash positions are paying 1.75% per year at present.

Meanwhile, our preferred fixed income positions are doing well. The TD Income Advantage fund is up +1.75% during the first 6-months of the year thanks to its diversified positions in equities and options.  The PIMCO Monthly Income, which invests in global fixed income instruments, is up +4.93% over the same time period.

United States

The US continues to be the land of haves and have-nots.  Shares of tech firms have appreciated considerably while energy, real estate, and consumer staples lagged behind.  The S&P500 is up 8.2% over the first 6 months though the Canadian dollar’s appreciation has detracted from the returns for Canadians by 3.8% for a net positive gain of +4.4%.

Our largest client US exposures are through our global mandates, most notably the RBC QUBE Global Low Volatility and Edgepoint’s Global Growth & Income.  The RBC position grants us exposure to giant companies like Johnson & Johnson and Coca-Cola, while the Edgepoint position is more focused on small to mid-sized corporations.  Both have performed well, posting returns of +7.03% and +6.90% respectively over the first six months despite being lower risk than the S&P500.

Global Equities

The rest of the developed economies of Europe, Australia, and Asia continue to benefit from loosened monetary and fiscal policies.  Emmanuel Macron’s electoral sweep in France as well as the lack of majority for Theresa May in England renews hope for positive economic reforms in Europe.  In Asia, the growing Chinese consumer class continues to fuel economic activity in the area, as discussed in IMI#40 “Bought In China”.

Over the last 12 months, we have recommended reducing positions in the US and Canada in favour of international positions and emerging markets.  This strategy has proven fruitful: specifically the Black Creek Global Leaders mandate, which is up 12.22% over the last 6-month period.  Our over-allocation to emerging markets was also a large contributor to performance, advancing +15.27% over the same period.

Summary

We are very pleased with the performance of our major allocations over the past six months and like the positions as they stand.  We are bullish on non-financial, non-commodity Canadian stocks and emerging markets while remaining bearish on bonds as well as US tech and large cap stocks.  We will continue to monitor your positions and notify you should any changes be recommended. 

Enjoy your summer!

Performance figures of major allocations as at June 30th, 2017

INDIVIDUAL ACCOUNTS 

Fund Name

Category

Risk Level

YTD

2016

1-Month

3-Month

6-Month

3-Year

5-Year

10-Year

Inception

TD Income Advantage – F

Cdn Bond

Low

+1.75%

+4.63%

-1.03%

0.50%

1.75%

3.39%

4.43%

4.71%

4.79%

PIMCO Monthly Income - F

Diversified Income

Low-Medium

+4.93%

+7.58%

0.27%

2.28%

4.93%

5.29%

8.53%

No data

11.66%

Edgepoint Global Growth & Inc - F

Global Growth

Low-Medium

+6.90%

+12.82%

0.39%

3.58%

6.90%

13.10%

16.28%

No data

15.31%

CI Cambridge Asset Allocation - F

Cdn Balanced

Low-Medium

+1.49%

+7.73%

-1.77%

0.31%

1.49%

5.98%

9.72%

No data

7.02%

CI Black Creek Global Leaders - F

Global Equity

Medium

+12.22%

+8.68%

-2.32%

4.41%

12.22%

14.48%

20.22%

9.16%

9.93%

RBC QUBE Global Low Volatility - F

Global Equity

Medium

+7.03%

+3.96%

-4.36%

1.82%

7.03%

14.97%

No data

No data

14.79%

BMO Canadian Low Volatility ETF

Cdn Equity

Medium

+6.27%

+13.05%

-0.62%

1.41%

6.27%

13.24%

15.81%

No data

-

RBC Emerging Markets Equity - F

Emerging Markets

High

+15.27%

+2.18%

-3.24%

4.46%

15.27%

10.81%

11.93%

No data

g7.85%

GROUP PLANS

Fund Name

Category

Risk Level

YTD

2016

1-Month

3-Month

6-Month

3-Year

5-Year

10-Year

Inception

DynamicEdge Balanced - A

Global Balanced

Low-Medium

+5.23%

+0.42%

-1.86%

1.28%

5.23%

4.86%

6.92%

No data

4.75%

Mackenzie Symmetry Balanced - A

Global Balanced

Low-Medium

+2.71%

+3.79%

-1.92%

0.06%

2.71%

3.98%

6.70%

No data

7.28%

All performance is net of all management expenses ratios (MER) but before Fee-For-Service advisor compensation if applicable.  
Source:  Morningstar.ca & TD Wealth

 

Jean-François Démoré
CIM, CFP, MBA, HBCCS

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The information contained herein was obtained from sources believed to be reliable, however, we cannot represent that it is accurate or complete. This report is provided as a general source of information and should not be considered personal investment advice or solicitation to buy or sell any securities mentioned. The views expressed are those of the author and not necessarily those of ACPI.

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