Portfolio returns: Q2 2024
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (Apr 19, 2022) |
IG Mackenzie U.S. Dollar Fund – Global Equity F |
3.22 |
3.86 |
13.71 |
19.62 |
9.22 |
|||
Quartile rankings |
1 |
1 |
1 |
1 |
IG Mackenzie U.S. Dollar Fund – Global Equity Series F
Portfolio commentary
Q2 2024
Highlights
① Strong equity market returns led to strong fund returns.
② Information technology stocks drove fund performance.
③ A focus on foreign stocks benefited returns.
Portfolio overview
It was a strong quarter for equity investors. The S&P 500 made multiple all-time highs in June, driven by a still-surging information technology sector. Signs of a cooling U.S. economy and tamer inflation readings trimmed the already-slim odds of additional hikes by the U.S. Federal Reserve (the Fed). The resilience of the U.S. economy coupled with the prospects of a soft landing for the U.S. also helped propel foreign equity markets higher. Within this economic and market backdrop, the IG Mackenzie U.S. Dollar Fund – Global Equity produced a positive return.
The fund added value relative to its benchmark in several ways. Selection of information technology stocks from the U.S. and Taiwan added almost 100bps to performance. Zero exposure to Canadian stocks also benefited performance as Canada was one of a handful of equity markets to post a negative return this quarter. The Canadian economy has an argument for being the worst-performing economy in the first half of 2024 with a quickly deteriorating job market.
Additionally, the fund’s 100% currency hedging policy to U.S. dollars contributed to returns primarily as the euro and yen lost ground to the greenback.
Detractors to fund performance versus its benchmark included an overweight allocation to and stock selection in French stocks.
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: diversify rather than de-risk
Though global equity markets appear expensive, the team believes that positive macroeconomic and technical factors outweigh stretched valuations. Solid corporate earnings growth, the likely end of rate hikes by the Fed, low U.S. recession risk, economic rebound in Europe and China, and optimism from artificial intelligence (AI) themes contribute to this view.
Rather than derisk from “expensive” equities, the team advocates diversifying towards cheaper markets with positive economic catalysts, like Italy and Japan. Japanese companies are investing after years of hoarding cash and benefiting from AI and advanced manufacturing trends. Italian companies are seeing windfalls from the European Central Bank’s implicit backing of national debt and Italy’s recent continent-leading economic growth.
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Commissions, fees and expenses may be associated with mutual fund investments. Read the prospectus and speak to an IG Advisor before investing. The rate of return is the historical annual compounded total return as of June 30, 2024, including changes in value and reinvestment of all dividends or distributions. It does not take into account sales, redemption, distribution, optional charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, values change frequently, and past performance may not be repeated. Mutual funds and investment products and services are offered through Investors Group Financial Services Inc. (in Québec, a Financial Services firm). Any additional investment products and brokerage services are offered through Investors Group Securities Inc. (in Québec, a firm in Financial Planning). Investors Group Securities Inc. is a member of the Canadian Investor Protection Fund.
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