Blog Hero Image

Posté par Greg Taylor en oct. 8ème, 2019

Uncertainty’s reign continues despite September’s stability

After a volatile August, equity markets stabilized post-Labour Day to move higher for the month. Fears of a recession following the yield curve inversion appear to be unfounded as risk appetites improved for all asset classes.

While markets moved broadly higher, an interesting event occurred as leadership flipped from growth to value. The safety trades of gold and defensives paused their advance in favour of more cyclical areas, such as financials and energy. Whether this proves to be a temporary event or the start of a more significant trend is yet to be seen.

Big tech, loosely defined as the FAANG stocks, appears to be under attack from a variety of directions, be it regulators or slowing demand. Big tech has been winning for too long and we may be finally starting to see the first steps in a shift away from these giants.

Throughout the summer, the headline market moves happened in the bond market, not equities. The inverted yield curve and sudden decline in yields signalled an ominous risk of a global slowdown. But in September, a combination of stronger data in the Americas and globally reversed this course. Throughout the month, the yield curve normalized and we saw the benchmark US 10-year Treasury yield move back towards the 2% level, where it was prior to the Federal Reserve’s July press conference, which seemed to cause much of the angst we saw in August.

September also saw a further rate cut from the US central bank, which was widely expected. While the debate continues as to whether this is a mid-cycle adjustment or the beginning of a new easing cycle, what is clear is that the current US president is more involved in US monetary policy than any other in recent memory. Markets continue to be data dependent, but until further notice, the bias remains lower for rates and potentially yields.

Trade is still the primary focus for investors. It appears we may be getting closer to a deal. However, while volatility has increased throughout the year and the cycle continues to age, there is a risk of going too defensive too soon and missing out on another leg higher, if a broad trade deal is reached.

October has seen its share of wild market moves in the past and the setup this year is no different. Markets, while higher on the year, really haven’t moved much on a year-over-year basis. They’ve had difficulty breaking through to new highs. Earnings season will be important this quarter to hear if trade tensions have impacted business operations to the degree that investors have been anticipating.

This isn’t the point in the cycle to be taking on risk or extending exposure to volatile parts of the market. There may be one more move higher left in this bull market on a positive trade deal. Whether it’s worth it to hang around for the final celebration or hit the exits early is a difficult call. Unfortunately, more than ever, it’s in the hands of politicians rather than economists.

Ideas with Purpose

Purpose Tactical Asset Allocation Fund (RTA) – Economic data and political headlines these days are flipping between positive and negative sentiments more frequently. That makes broader asset allocation a much tougher task. RTA can help take a lot of that burden off your shoulders by automating much of the process, thanks to its systematic model that analyzes a whole host of economic and market indicators.

Purpose Specialty Lending Trust – With volatility higher in public markets, private assets are a very attractive source of alternative returns. Private debt features very low correlation to traditional assets and heightened yields thanks to the illiquidity premium. Purpose Specialty Lending Trust is Canada’s first global multi-manager private debt fund. It’s also the easiest way for Canadian investors to access a favoured asset class of pensions and institutions.

— Greg Taylor, CFA is the Chief Investment Officer of Purpose Investments


All data sourced from Bloomberg unless otherwise noted.

The content of this document is for informational purposes only, and is not being provided in the context of an offering of any securities described herein, nor is it a recommendation or solicitation to buy, hold or sell any security. The information is not investment advice, nor is it tailored to the needs or circumstances of any investor. Information contained in this document is not, and under no circumstances is it to be construed as, an offering memorandum, prospectus, advertisement or public offering of securities. No securities commission or similar regulatory authority has reviewed this document and any representation to the contrary is an offence. Information contained in this document is believed to be accurate and reliable, however, we cannot guarantee that it is complete or current at all times. The information provided is subject to change without notice.

Commissions, trailing commissions, management fees and expenses all may be associated with investment funds. Please read the prospectus before investing. If the securities are purchased or sold on a stock exchange, you may pay more or receive less than the current net asset value. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated.

Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend on or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” intend,” “plan,” “believe,” “estimate” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained in this document are based upon what Purpose Investments and the portfolio manager believe to be reasonable assumptions, Purpose Investments and the portfolio manager cannot assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on the FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed, that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.

Fond mentionné dans cet article

Greg Taylor, CFA

Greg Taylor is the Chief Investment Officer of Purpose Investments. A data-driven manager with a focus on managing risk through active-trading strategies, Greg specializes in finding and exploiting pockets of volatility in the market to drive returns. He spent more than 15 years managing pension and mutual fund assets at Aurion Capital Management. He also held a role of senior portfolio manager at Front Street Capital and LOGiQ Asset Management before coming to Purpose Investments.

Greg serves on the investment committee for the MS Society of Canada and advises the finance program’s portfolio management course at Bishop’s University. He has won numerous Brendan Wood International “TopGun” awards and is a regular host and guest on BNN Bloomberg and Toronto’s all-news radio station, 680News. Greg is a CFA Charterholder and has a BBA in Finance from Bishop’s University.