Purpose Monthly Income Fund December Commentary

Purpose Monthly Income Fund December Commentary

Fund Highlights

  • All three sleeves were in the red this month but the Fund outperformed the broad market on the back of diversified interests.
  • Fixed income exposure was negative due to a sell-off in the high yield space as the U.S. crossed “Lift Off” in December. Positions in government bonds and investment grade bonds set-off some of the loss as the Bank of Canada signaled dovish outlook on weakness across the energy sector and the possibility of an economic slowdown.
  • Dividend equities were boosted by U.S. REIT exposure and the defensive utilities and staples sectors. However, the global commodity rout counteracted these gains with losses coming from the materials sector.
  • Real assets were negative along with cyclical equities across energy, agriculture and metals.
  • The Fund rebalanced the fixed income sleeve and lowered weight in high yield while increasing government and investment grade bonds.
  • The Fund continued to hedge U.S. dollar currency exposure maintaining a net U.S. dollar exposure at approximately 7% of the Fund’s NAV.

Market Commentary

Stocks and bonds ended lower in December to close out generally choppy performance for 2015.[Add sentence or 2 on 2015 market performance for U.S. equities, Canadian Equities, MSCI EAFE (local currency) and Canadian Fixed Income and oil and gold.] The main focus this month was on the FOMC decision. After another solid U.S. job number gave the green light for « lift off » the Fed delivered by hiking rates by 0.25% for the first time in a decade. The Fed went on to assuage concerns over the pace of future hikes by promising that the path would be gradual and data consistent. In Europe, Draghi underwhelmed on the extent of rate cuts and further QE measures which sparked a sharp rally in the Euro and European yields. In Asia, Chinese growth concerns resurfaced as the central bank allowed the yuan to weaken to its lowest level in over 4 years. In commodities, oil sold off further to new lows on the year after OPEC maintained its current production rate which disappointed potential expectations for a potential supply cut. Canada traded poorly on the back of this as the loonie and the S&P/TSX both sold off to end the year.

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