Portfolio returns: Q2 2024
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (Jul 12, 2013) |
IG Managed Payout Portfolio F |
0.59 |
1.23 |
2.80 |
7.26 |
1.32 |
2.55 |
3.14 |
3.70 |
Quartile rankings |
3 |
1 |
3 |
3 |
2 |
2 |
2 |
IG Managed Payout Portfolio Series F
Portfolio commentary
Q2 2024
Highlights
① The portfolio gained over the quarter, buoyed by a strong economic backdrop that supported both equity and bond returns.
② U.S. equities performance was a primary contributor to returns, led by information technology stocks.
③ Positive Canadian bond returns were boosted by falling interest rates.
Portfolio overview
IG Managed Payout Portfolio was up in the quarter. All funds within the portfolio generated positive returns before fees.
Equities exposure, represented by the portfolio’s 34% allocation to the Mackenzie Global Equity Income Fund, was the largest contributor to performance. Returns were driven by U.S. equity stocks, primarily from a still-surging information technology sector. Relative to its benchmark, the fund modestly underperformed. Its dividend-income-generating focus dragged on returns as higher-dividend-paying stocks, like financial institutions and energy companies, lagged growth-oriented technology stocks. Canadian equities also dragged on returns, with Canada moving in the opposite direction of foreign markets, delivering a small loss for the period. The equity fund also utilizes a stock options strategy, designed to preserve capital during times of severe equity market stress. The stock options for the quarter added value as equity markets experienced large negative returns early in the quarter.
Mackenzie Canadian Bond Fund, representing 21% of the portfolio, was the top returning fixed income fund in the portfolio. Canadian bonds benefited from a rise in prices as the Bank of Canada cut 25 bps from its overnight lending rate in June. Relative to its benchmark, an overweight allocation to corporate bonds and security selection within the financials and energy sectors added value, as did short exposure to Japanese government bonds.
Mackenzie Gold Bullion Fund, representing 2% of the portfolio and held as an inflation-sensitive asset, performed well this quarter as gold prices rose about 4.3%. Geopolitical uncertainty coupled with strong interest from central banks and Asian buyers has boosted gold prices this year.
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 U.S. Federal Reserve (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.
The team remains cautious on bonds in the near term, particularly U.S. government bonds. U.S. interest rates likely remain elevated as the Fed continues to monitor inflation and economic data before committing to any rate-reduction policy.
To discuss your investment strategy, speak to your IG Advisor.
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.
This commentary may contain forward-looking information which reflects our or third-party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and do not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of June 30, 2024. There should be no expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.
This commentary is published by IG Wealth Management. It represents the views of our Portfolio Managers and is provided as a general source of information. It is not intended to provide investment advice or as an endorsement of any investment. Some of the securities mentioned may be owned by IG Wealth Management or its mutual funds, or by portfolios managed by our external advisors. Every effort has been made to ensure that the material contained in the commentary is accurate at the time of publication, however, IG Wealth Management cannot guarantee the accuracy or the completeness of such material and accepts no responsibility for any loss arising from any use of or reliance on the information contained herein.
Trademarks, including IG Wealth Management and IG Private Wealth Management, are owned by IGM Financial Inc. and licensed to subsidiary corporations.
© Investors Group Inc. 2024