IG Mackenzie U.S. Dollar Fund – Global Equity Series F

Portfolio Commentary<br> Q4 2023

Highlights

① Equities were up for the quarter, and financials and health care were the biggest contributing sectors to fund 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

Global equities and bonds rallied in the period as investors began anticipating earlier-than-expected central bank rate cuts and positive market sentiment was renewed. Although the fund was also up in the quarter, it underperformed its benchmark. An underweight position and security selection in the consumer staples sector detracted the most from performance. Conversely, security selection in the consumer discretionary and industrials sectors contributed to performance. 

Foreign equity makes up almost 98% of this fund.

Portfolio: The fund was up as global markets rallied but underperformed its benchmark.

Performance contributors

+ The industrials sector contributed the most to relative performance with security selection being the biggest contributor. 

+ Security selection in the consumer discretionary sector was also one of the top contributors to relative performance. 

+ Security selection in the materials sector also contributed to performance relative to the benchmark.

Performance detractors

- Security selection and an overweight position in the consumer staples sector was the biggest detractor from performance as the sector was down in the quarter.

- Security selection in the financials sector also detracted from performance.

- Security selection in the health care sector also detracted from performance.

Portfolio Returns: Q4 2023

Total Return 1M 3M YTD 1YR 3YR 5YR 10YR Since Inc. (April 19, 2022)

IG Mackenzie U.S. Dollar Fund – Global Equity F

3.20

9.20

16.72

16.72

     

3.91

<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.  

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