Portfolio returns: Q2 2024
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. July 12, 2013 |
IG Core Portfolio – Balanced F |
0.80 |
1.32 |
6.22 |
11.18 |
3.75 |
6.06 |
5.79 |
6.47 |
Quartile rankings |
3 |
2 |
2 |
2 |
1 |
1 |
2 |
IG Core Portfolio – Balanced Series F
Portfolio commentary
Q2 2024
Highlights
① The portfolio advanced as interest-rate-cut expectations and diminishing fears of an economic slowdown lifted stocks and bonds.
② U.S. equities contributed the most to returns.
③ Canadian equities and U.S. small- and mid-cap stocks detracted.
Portfolio overview
IG Core Portfolio – Balanced rose (+1.3%) over the period as stocks and bonds gained ground in most regions. It outperformed its Global Neutral Balanced peer group average (+0.9%), mainly due to its exposure to U.S. equities.
The portfolio benefited from the strong performance of most of its U.S. equity components and several other segments that hold significant exposure to U.S. equities. The two largest of these, the T. Rowe Price – IG U.S. Equity Pool and the Mackenzie – IG U.S. Equity Pool, together comprise a little more than 18% of the portfolio and yet accounted for more than 50% of the portfolio’s total return. T. Rowe Price – IG U.S. Equity Pool was the best-performing U.S. segment and outperformed the S&P 500 Index mostly due to its stock selection in the information technology and consumer discretionary sectors.
The top-performing segment in the portfolio was not invested in U.S. equities, but rather in emerging markets equities. Relative to the MSCI Emerging Markets Index Total Return (Net) $ CAD, the J.P. Morgan – IG Emerging Markets Pool benefited mainly from an overweight exposure to the information technology sector, especially in Taiwan and South Korea.
The poorest-performing component was the Mackenzie U.S. Mid Cap Opportunities Fund, which declined as small- and mid-cap stocks underperformed large-caps in the U.S. Two of the Canadian stock segments – the Mackenzie – IG Canadian Equity Income Pool and the Mackenzie – IG Canadian Equity Pool – also weighed on portfolio results as the S&P/TSX Composite Index Total Return fell over the quarter. The third Canada equity segment – the Fidelity – IG Canadian Equity Pool – had a small gain and outperformed the TSX, but underperformed the portfolio as a whole.
All fixed income elements were higher over the period. Mackenzie – IG Canadian Bond Pool was the top contributing fixed income segment, in part because of its weight allocation (almost 20% of the portfolio). The pool outperformed the FTSE Canada Universe Bond Index Total Return. In anticipation of interest rate cuts in Canada and the U.S., duration of the North American holdings was increased in recent months, which benefited performance as yields edged lower in May and June. The pool also benefited from a continuing negative (short) position in Japanese government bonds (JGBs), which fell over the period.
The other fixed income components delivered mixed results, with corporate, high-yield and short-term segments lifting the portfolio’s aggregate return, while global bond exposure, although positive, weighed on overall results. IG Mackenzie Floating Rate Income Fund and the IG Mackenzie Mortgage and Short Term Income Fund were the best-performing fixed income segments.
The portfolio’s second-largest segment, the BlackRock – IG Active Allocation Pool, was higher but detracted from relative results as it underperformed its blended benchmark over the period due to sector strategy in U.S. equities.
Market overview: AI pushed equity growth while central banks started to pivot
The second quarter continued to be dominated by the growing influence of artificial intelligence, with investors focused on opportunities in AI-enabled businesses and hardware. Additionally, there was a notable shift in monetary policy as some central banks adjusted their interest-rate policies as inflation risks receded.
In Canada, year-over-year inflation dropped to 2.9%, while in the U.S. it fell to 3.3%. Both indicators are trending downward and remain range bound. The Bank of Canada was the first among central banks in the G7 to cut its overnight lending rate, which we view not as a divergence in monetary policy, but rather as a precursor to the U.S. Federal Reserve eventually following suit. The European Union also cut rates modestly, while the Bank of England held rates as-is, for now. In our view, Canada and Europe have an increased risk of an economic slowdown, while U.S. and emerging market (EM) economic conditions appear to be improving. Canadian and international equities may be weighed down by slower economic growth and potentially weaker earnings growth, with limited valuation upside.
Market outlook: global economic conditions remain favourable
We believe interest rates at central banks have peaked, with Canada and the European Union lowering rates ahead of the U.S. Federal Reserve. The economic outlook shows signs of levelling out compared to three months ago, as unemployment ticked higher and consumer spending plateaued. The summer months may bring heightened headline risk surrounding the U.S. presidential election, but seasonality and historical data suggest equity markets are typically positive heading into the fall.
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