IG Managed Growth Portfolio – Canadian Neutral Balanced Series F

Portfolio Commentary<br> Q4 2023

Highlights

① The portfolio’s equity allocation was the most significant contributor to performance, followed by fixed income.

② The fourth quarter sent stocks and bonds prices higher.

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

Portfolio Overview

Equities and fixed income markets rallied in the period as investors began anticipating earlier-than-expected central bank rate cuts and positive market sentiment was renewed.

Within equities, allocations to the Mackenzie – IG Canadian Equity Pool, Mackenzie – IG U.S. Equity Pool and Mackenzie EAFE Equity Pool were the largest contributors. There were no equity detractors. Within fixed income, allocations to the Mackenzie – IG Canadian Bond Pool, Mackenzie Broad Risk Premia Collection Fund and Mackenzie North American Corporate Bond Fund were the largest contributors. There were no fixed income detractors. 

Canadian equity (31%), fixed income (29%) and foreign equity (28%) make up the bulk of this fund.

Portfolio: U.S. and Canadian equities led portfolio returns, followed by sovereign bonds and corporate bonds. 

Performance contributors

Mackenzie – IG Canadian Equity Pool
+ The pool was the largest weighted allocation in the portfolio and the top contributor to portfolio returns. The pool outperformed its benchmark, with security selection in the materials, industrials and information technology as the top contributors. Conversely, an overweight allocation to the energy sector and an underweight exposure to the financials sector were the top detractors.

Mackenzie – IG Canadian Bond Pool
+ The pool was the second-largest weighted allocation in the portfolio and the second-largest contributor to portfolio returns. The pool slightly underperformed its benchmark as it was underweight duration in an environment where bond yields overall declined. Federal and provincial government bonds were the top detractors. Conversely, financial sector and industrial sector corporate bonds were the top contributors as a result of duration management and security selection.

Mackenzie – IG U.S. Equity Pool
+ The pool was among the largest weighted allocations in the portfolio and was the third-largest contributor to portfolio returns. The pool outperformed its benchmark, with security selection in the health care, financials and consumer discretionary sectors as the top contributors. Conversely, an underweight allocation and security selection in the information technology sector were the top detractors.

Performance detractors

Mackenzie Emerging Markets Large Cap Fund 
- The pool was the smallest weighted allocation in the portfolio and was relatively flat from a contribution/detraction standpoint. The fund slightly underperformed its benchmark, with security selection in the industrials and information technology sectors as the top detractors. Conversely, security selection in the financials and energy sectors were the top contributors.

Mackenzie Enhanced Fixed Income Risk Premia Fund
- The pool was among the smallest weighted allocations in the portfolio and while not a detractor, it was one of the smallest contributors to portfolio returns. The fund is a levered fixed income fund. The investment team uses leverage to manage total portfolio fixed income exposure in a capital efficient way.

Portfolio Returns: Q4 2023

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

IG Managed Growth Portfolio – Canadian Neutral Balanced Series F

3.68

8.07

10.43

10.43

3.08

5.51

4.57

4.99

<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.