Portfolio returns: Q2 2024
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (Aug 9, 2021) |
iProfile Portfolio – Global Equity F |
1.45 |
2.55 |
11.81 |
18.09 |
6.64 |
|||
Quartile rankings |
3 |
2 |
2 |
2 |
iProfile™ Portfolio – Global Equity Series F
Portfolio commentary
Q2 2024
Highlights
① U.S. equities driven by the information technology and telecommunications sectors.
② The portfolio rose over the period as all component iProfile Private pools were higher except for the iProfile Canadian Equity Private Pool.
③ Consumer spending has plateaued and economic growth has normalized.
Portfolio overview
The iProfile™ Portfolio – Global Equity, Series F, rose over the period (+2.6%), mainly due to the strong performance of U.S. equities, and outperformed its Global Equity peer group median.
Equity returns were especially strong from the iProfile U.S. Equity Private Pool (+5.4%) and the iProfile Emerging Markets Private Pool (+4.6%). The iProfile ETF Private Pool (+3.3%) and the iProfile Alternatives Private Pool (+2.7%) also contributed, mainly due to their significant exposure to U.S. equities.
U.S. markets generally outperformed other regions as the gradual softening of economic data provided more evidence that monetary policy is bringing a downshift in inflation that will permit interest rate reductions later this year. The top-performing U.S. pool contributed the most to portfolio returns and was in line with the S&P 500 Index Total Return $ CAD (5.4%), with relative performance benefiting most from stock selection in the health care (especially pharmaceuticals), consumer staples (retailing) and information technology (lack of exposure to Intel and Cisco Systems) sectors. The two large-capitalization growth portions of the pool delivered the strongest performances, with both contributing sub-advisors (Putnam Investments and American Century Investments) outperforming not just the S&P 500 Index, but also the Russell 1000 Growth Index (9.4%).
The iProfile ETF Private Pool, which comprises more than 10% of the portfolio, was the second-greatest contributor to portfolio returns. Its gains were mainly due to its investments in the Mackenzie US Large Cap Equity Index ETF (traded on the Toronto Stock Exchange under the symbol QUU).
The iProfile Emerging Markets Private Pool was the second-best performing component iProfile pool after the U.S. equity pool. It benefited mainly from gains in the Asia-Pacific region, especially in China, Taiwan and India, and particularly from stock selection in the semiconductor industry in Taiwan. However, it had limited impact on overall portfolio results due to its relatively small weight allocation. The value-oriented segment managed by the Mackenzie Investments Global Quantitative Equity Team posted the strongest performance in the pool.
The iProfile Canadian Equity Private Pool (-0.4%) was the only component iProfile pool to lose ground over the period. The pool’s top detractor from relative performance was an underweight exposure to the materials sector, which was the top-performing sector in the benchmark S&P/TSX Composite Index. Of the five segments of the pool, three outpaced the index, which declined, and two of those posted fractionally positive returns. The Fidelity Investments-managed core segment was the top performer but even so was up less than one half of one percent.
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: global economic conditions remain favourable
We believe interest rates at central banks have peaked, with Canada and the European Union lowering rates ahead of the U.S. Federal Reserve. The economic outlook shows signs of levelling out compared to three months ago, as unemployment ticked higher and consumer spending plateaued. The summer months may bring heightened headline risk surrounding the U.S. presidential election, but seasonality and historical data suggest equity markets are typically positive heading into the fall.
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