IG Core Portfolio – Income Series F

Portfolio Commentary<br> Q4 2023

Highlights

① Exposures to mortgages and short-term income led portfolio performance.

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, Series F, posted positive performance in the quarter as bond yields decreased. Within fixed income, the IG Mackenzie Mortgage and Short Term Income Fund and the Mackenzie – IG Canadian Bond Pool contributed the most to portfolio performance while the IG Mackenzie Real Property Fund detracted from performance.

Fixed income makes up 100% of this fund.

Portfolio: Mortgages and corporate bonds contributed to performance during the period.

Performance contributors

IG Mackenzie Mortgage and Short Term Income
+ The fund was the largest weighted allocation in the portfolio and the largest contributor to portfolio returns. Front end yields experienced the largest decrease across the curve, while mortgages and corporate bonds led returns. 

Mackenzie – IG Canadian Bond Pool Series
+ The fund was the second-largest weighted allocation in the portfolio and the second-largest contributor to portfolio returns as credit spreads tightened and corporate bonds posted strong returns.

Performance detractors

IG Mackenzie Real Property Fund
- The fund is the third-largest weighted allocation in the portfolio and the largest detractor from performance. The fund’s total return performance decline was attributable to market forces and the writing down of its property values. 

Portfolio Returns: Q4 2023

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

IG Core Portfolio – Income F

1.74

3.76

4.58

4.58

0.55

2.26

2.40

2.41

<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.