Wednesday June 15th, 2016
- Markets remained positive in May and NXC received a boost from a stronger macro picture in the United States with better than expected data across manufacturing, retail sales and jobs.
- Canadian markets also performed well in the month as commodities continued to climb higher with crude finding comfort near $50.
- U.S. real estate was the best contributing sector in the portfolio in contrast to Canadian Financials which was the only detractor. This theme broadly reflects the contrasting Fundamentals of the two economies currently.
- Option overwriting on the Fund was positive, adding 7bps of return over the month.
- The Fund completed a quarterly rebalance this month replacing 5 names in the portfolio. The geographic mix of the Fund switched towards more of a balance as the Fund is now long 22 Canadian and 19 U.S. securities (vs 23 Canadian and 18 U.S. previously).
- The loonie lost momentum from the previous month sliding -4% against the greenback and the currency hedge was detractive to the Fund. The Fund continued to hedge U.S. dollar currency exposure maintaining a net U.S. dollar exposure of approximately 7% of the Fund’s NAV.
Markets ended higher this month on the back of general positive sentiment. Despite numerous macro overhangs, such as possible Fed rate hikes, a weaker yuan and an impending Brexit vote markets continued to climb the wall of worry. US data was better than expected across manufacturing, retail sales and jobs which bolstered calls for a rate hike by July. Canadian GDP and trade data were worse than expected, with the negative effects of the Alberta fires yet to filter into the data. The divergent economic pictures caused the loonie to sell off 4% on the month. Commodities continued to grind higher with crude finding comfort near $50. Investment grade credit and high yield remained in the sweet spot for investors wanting to own risk while also earning an attractive yield.