IG Core Portfolio – Income Focus Series F

Portfolio Commentary<br> Q4 2023


① Stocks and bonds surge as bond yields plunge.

② The fourth quarter sent stocks and bonds prices higher.

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

Portfolio Overview

The IG Core Portfolio – Income Focus rose over the period but slightly underperformed its Global Fixed Income Balanced peer group average, in part due to the decline in value of its holdings of IG Mackenzie Real Property Fund.

Stocks and bonds gained ground in all regions. Most major central banks paused their rate hike campaigns in the face of soft economic activity and slowing inflation, fueling speculation that their next move will be rate cuts. Bond yields plunged and both stocks and bonds surged higher on expectations that central banks might successfully engineer a “soft-landing” for the economy.

The portfolio’s U.S. and international equity strategies were among the top performers, while the Canadian bond segment was the top overall contributor due to its weight. Short-term fixed income and alternative strategies underperformed. The portfolio’s holdings of IG Mackenzie Real Property Fund fell over the period.

Fixed income (66%) and foreign equity (11%) make up the bulk of this fund.

Portfolio: North American and European equities lead

Performance contributors

Mackenzie US Mid Cap Opportunities Fund
+ The fund was the strongest performer in the portfolio as small and mid-cap equities generally outperformed large-caps in the U.S. The fund outperformed small, mid and large cap benchmarks but had limited impact on overall results due to its small weight allocation.

IG Mackenzie European Equity Fund
+ The fund outperformed the MSCI Europe Index mainly due to stock selection in the health care sector (especially pharmaceuticals) and the consumer discretionary sector (especially retailers). An overweight exposure to the information technology sector also contributed to performance.

IG Mackenzie European Mid-Cap Equity Fund
+ The fund ranked among the portfolio’s top performers. However, it underperformed the MSCI Europe Mid Cap Index mainly due to an overweight exposure to the energy sector, which fell, and stock selection in the financials and information technology sectors.

Performance detractors

IG Mackenzie Real Property Fund 
- The fund fell as higher interest rates weakened the demand for commercial real estate and worries of a potential recession put pressure on property values. The fund has written down property values, particularly office properties, recently. However, the fund outperformed its real estate benchmark over the period.

Mackenzie Global Macro Fund
- The fund underperformed major global equity and fixed-income benchmarks as is expected in periods of strong capital markets. Top contributors were long exposure to equities and a long exposure to the Japanese yen. Losses on short exposures to long-duration government bonds and put options on U.S. equities detracted most from performance.

IG Mackenzie Floating Rate Income Fund
- The fund rose modestly but was the weakest of the portfolio’s traditional fixed income components. The fund lagged both long-term and short-term investment grade bonds as floating rate loans lacked the duration-based sensitivity to falling yields that lifted the other asset classes. 


Portfolio Returns: Q4 2023

Total Return 1M 3M YTD 1YR 3YR 5YR 10YR Since Inc. (July 12, 2013)

IG Core Portfolio – Income Focus F









<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.