Tuesday February 17th, 2015
The Fund holds a diversified portfolio of high quality North American companies that have shown a capacity to pay and grow their dividends.
The Fund was negative in January. Global bond yields fell this month as major central banks increased accommodative policies to fend off deflationary pressures. The Bank of Canada was no different as a surprise rate cut sent Canadian yields to all-time lows and caused the loonie to plunge 8.7%. As a result, investors sought out yield which benefited dividend paying stocks in the Fund. Precious metals surged higher in response to central bank currency devaluations which also helped lift mining stocks. This month the best performing sectors were utilities, real estate and materials. U.S. names outperformed Canadian as our top names were Agrium, Altria and HCP REIT.
Financials, energy and industrials were the weakest sectors. Banks stocks were under pressure this month on the back of soft earnings and the prospect of a flattening yield curve. Energy names continued to experience headwinds from the falling price of oil. Bombardier, Finning and CIBC were the worst performers this month.
The portfolio holds 18 U.S. equities and 22 Canadian equities, and continues to hedge USD currency exposure maintaining a net USD exposure at approximately 5% of the Fund’s NAV.
Markets were volatile this month as central bank activity dominated most of the headlines. Deflation worries spurred the ECB to initiate a Euro 1.1 trillion stimulus package targeting the purchase of sovereign debt. The Bank of Canada shocked the market with a 25 bp rate cut citing recent weak economic data and concern over the negative effect of plummeting oil prices. The Swiss national bank roiled financial markets when it removed its long held peg versus the euro triggering a historic 20% move higher in the Swiss franc. This month European equity markets were the strongest performers on the back of the ECB action. U.S. markets ended down 3% and the S&P/TSX closed slightly positive. Commodities continued to experience weakness this month. The energy sell off extended lower as crude fell another 10%. Copper fell 13% to 5 year lows on declining demand and worse than expected economic data in China. Precious metals bucked the trend as gold rallied on safe haven flows. Currency markets were extremely volatile this month as central banks drove large moves. The dollar continued to see strength versus the Euro and other commodity currencies. Canada was the worst performing G10 currency falling 8.7% after the BOC’s surprise rate cut.