Purpose Core Dividend Fund July Commentary

Fund Highlights

  • Strength in the U.S. markets was contrasted by weakness in Canada this month as the fund had positive return in July.
  • Interest rate sensitive sectors bounced back after underperforming in June. Real estate, utilities and staples were the best performers. The tobacco holdings Reynolds and Altria, saw a significant rally on stronger earnings and a supportive forward outlook. Energy and materials sectors underperformed as further commodity weakness dragged on equity holdings.
  • The portfolio holds 17 U.S. equities and 23 Canadian equities and U.S. equities were responsible for all gains across the Fund while Canadian equities were slightly negative.
  • This month, the non-hedged long USD exposure was a tailwind as CAD dollar declined over 5% against the U.S. dollar. The Fund continued to hedge USD currency exposure and took the opportunity to reduce USD exposure from approximately 10% to 7% of the Fund’s NAV.

Market Commentary

In July, global stocks ended higher with strength in the U.S and Europe contrasted by weakness in Canada and China. The Greece overhang was temporarily resolved as Greece voted “yes” to more austerity and in return the ECB provided a bridge loan to tide debtors over until a 3rd bailout could be negotiated. In the U.S jobs data was slightly softer, nonetheless the Fed retained faintly hawkish overtones in its statement preparing the market for the possibility of a rate hike into the end of the year. In Canada, sluggish economic data and falling energy prices prompted the BOC to unexpectedly cut interest rates for a second time this year. Poloz went on to suggest that there were more tools at his disposable to fend off a potential recession.
Commodities ended lower this month. The announcement of a historic U.S backed nuclear deal with Iran caused crude to plummet in anticipation of more Iranian oil coming online. Inventory builds and weakening demand exacerbated the move lower as WTI closed below $50 for the first time in months. Gold plummeted to new multi-year lows as geopolitical fears over Greece waned and the dollar strengthened. Grains also reversed course as prices stabilized after experiencing heavy short covering the previous month.
Currency markets continued to see volatility. The U.S dollar saw broad strength after the Fed indicated a possible rate hike by year end. CAD was one of the worst performers this month falling over 5%.

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