IG Climate Action Portfolio - Global Equity Balanced Series F

Portfolio Commentary<br> Q4 2023

Highlights

① Strong performance from U.S. equities contributed the most to Q4 2023 returns.

② The fourth quarter sent stocks and bonds prices higher.

③ The earnings outlook is improving, as forward-looking indicators turn positive.

Portfolio Overview

All portfolio positions performed positively in the quarter, with the IG Mackenzie Betterworld Global Equity Fund leading performance contributors.

Foreign equity (72%) and fixed income (20%) make up the bulk of this fund.

Portfolio: Delivered strong results as markets experienced a rebound in the final two months of the year.

Performance contributors

Mackenzie Betterworld Global Equity Fund
+ This strategy had the highest allocation while also outperforming its benchmark.

+ Stock selection within the information technology and real estate sectors contributed the most to total performance. 

+ A meaningful underweight exposure to the energy sector was also beneficial as this sector was the only one with a negative return in the quarter.   

Rockefeller – IG Climate Solutions Pool
+ This strategy had the second-highest allocation while also outperforming its benchmark. 

+ Stock selection within the utilities and health care sectors contributed most to performance while an underweight exposure to the energy sector also added value in the quarter. 

Mackenzie Betterworld Canadian Equity Fund
+ This strategy outperformed its benchmark during the quarter. 

+ Stock selection within the consumer staples and industrials sectors contributed most to performance while an underweight exposure to the energy sector also added value in the quarter. 

Performance detractors 

Mackenzie Global Sustainable High Yield Bond Fund
- While not a detractor from performance, the fund was one of the smallest contributors to portfolio returns while also underperforming its benchmark. 

Mackenzie Greenchip Global Environmental Equity Fund  
- While not a detractor from performance, the strategy underperformed its benchmark and was among the smallest contributors to portfolio returns. 

- Sectors with exposure to renewable energy were challenged throughout 2023, with October being an especially difficult month.

- Being underweight the energy sector contributed to performance while security selection in the industrials and materials sectors detracted from performance. 

Mackenzie Sovereign Bond Fund
- While not a detractor from performance, the fund was among the smallest weighted allocations in the portfolio and one of the smallest contributors to portfolio returns. 

Portfolio Returns: Q4 2023

Total Return 1M 3M YTD 1YR 3YR 5YR 10YR Since Inc. (Oct 25, 2021)

IG Climate Action Portfolio – Global Equity Balanced F

4.03

8.93

13.97

13.97

     

-0.52

<strong>Market Overview</strong>: The last quarter of 2023 set a positive tone for the new year.

The fourth quarter saw a rally in most asset classes and sectors. Yields went down, sending both stocks and bonds higher. The markets aggressively priced in an economic “soft-landing”, which impacted valuations across the board. U.S. stocks began the quarter with a forward price-to-earnings (P/E) ratio in the mid-17s, but ended close to 20, a significant increase.

Bond yields went up a lot during the year, yet the fourth quarter's rally sent the US 10-year Treasury yield down to 3.87% (the exact same level at which it ended in 2022).

Canadian equities finished the year strongly, with the  S&P/TSX Composite Index increasing by 7.25% (and ending the year up 8.12%). Information technology led the rally, with returns of 23.9% for the quarter, while energy was the only sector to decline.  

<strong>Market Outlook</strong>: Economic indicators point towards U.S. recovery.

Central banks in Canada, Europe and the U.S. are expected to lower interest rates at some point in 2024. Signs show the manufacturing and earnings slump is fading, and the era of high inflation and interest rates is coming to an end. There are more indicators pointing to a U.S. recovery rather than a recession.

The earnings outlook is now brighter, as previous economic soft spots recede, and forward-looking indicators turn positive. Valuations shifted in the fourth quarter of 2023 to reflect this improved outlook. This means that some early-year volatility is possible, as the markets digest the latest macro-economic data and determine if their optimism was warranted or exaggerated.  

To discuss your investment strategy, speak to your IG Consultant.