Portfolio returns: Q2 2024
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (Apr 11, 2022) |
IG U.S. Taxpayer Portfolio – Global Fixed Income Balanced F |
1.01 |
0.97 |
3.28 |
6.67 |
3.27 |
|||
Quartile rankings |
1 |
2 |
2 |
3 |
IG U.S. Taxpayer Portfolio – Global Fixed Income Balanced Series F
Portfolio commentary
Q2 2024
Highlights
① IG U.S. Taxpayer Portfolio – Global Fixed Income Balanced performed in line with its Global Fixed Income Balanced category over the quarter, net of ETF fees.
② Higher exposure to U.S. equities versus peers contributed to performance.
③ IG U.S. Taxpayer Portfolio – Global Fixed Income Balanced held slightly more fixed income than its median peer over the period, which detracted from performance.
Portfolio overview
IG U.S. Taxpayer Portfolio – Global Fixed Income Balanced had positive total returns over Q2 2024 and performed in line with its Global Fixed Income Balanced peer group.
IG U.S. Taxpayer Portfolio – Global Fixed Income Balanced held slightly more fixed income than the median peer over the period, which resulted in a performance that was in line with the median. Within equities, a higher exposure to U.S. equities versus peers was additive. Preference for Taiwan and lower exposure to France versus a global market cap weighted index was also additive. Within U.S. equity sectors, more exposure to the utilities sector versus the S&P 500 Index was additive to performance, while less exposure to the information technology sector weighed on performance.
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: Shifting from spring overheating to summer soft-landing.
The macro pendulum continued its shift from spring overheating to summer soft-landing as stocks rose and bond yields fell over recent weeks. The feedback loop between these two scenarios has characterized much of the last year and our expectation remains for this dynamic to continue. While there have been some signs of moderation in pockets of U.S. growth, our indicators suggest that global growth sequentially firmed over the last month and underlying price pressures remained above pre-pandemic levels. Moreover, the latest political developments in France provide further evidence of a shift in voter preferences towards greater fiscal activism. We continue to believe that policymakers will ultimately prioritize sustaining fiscal activism over returning inflation to target, which should provide favourable conditions for our broadly reflationary positioning.
While French geopolitical risk may create some near-term volatility, we believe the most likely outcome will entail a more stimulative fiscal policy stance, which should provide a tailwind to procyclical assets.
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