Purpose Core Dividend Fund June Commentary

Fund Highlights

  • The Fund was negative in June. Markets ended lower this month as geopolitical uncertainty weighed on risky assets.
  • Dividend equities underperformed the U.S. broad market as U.S. bond yields continued higher in anticipation of U.S. Fed rate hike which negatively impacted interest rate sensitive securities. Canadian dividend equities fared better than the Canadian market as better than expected jobs number were offset by weaker GDP and retail sales. This soft data renewed concerns of recession and bolstered calls for further rate cuts from the Bank of Canada.
  • This month, the consumer discretionary and materials names were the best performers. Darden moved higher after reporting strong earnings and announcing plans for a REIT spin-off. Oil and gas pipeline names saw a boost on speculation that consolidation was on the horizon for companies dealing with the recent plunge in energy prices. Interest rate sensitive names across utilities and real estate were the worst performers as U.S. yields rallied higher in anticipation of Fed hikes later this year.
  • Lorillard was acquired by Reynold American this month.The Fund replaced the position with National Bank of Canada. The portfolio now holds 17 U.S. equities and 23 Canadian equities.

Market Commentary

Markets ended lower this month as global geopolitical risks weighed on risky assets. Greece was an overhang on the Eurozone as probability rose that it would default on IMF loans due at the end of the month. The Greek government also shut down local banks and called a surprise referendum which heightened uncertainty. In the U.S. , jobs data came in stronger than expected which put the U.S. Fed on a path to raise interest rates later this year. However, despite the dovish FOMC comments U.S. bond yields continued higher causing volatility across interest rate sensitive assets. In Canada, economic data was mixed as better than expected jobs numbers were offset by weaker GDP and retail sales. This soft data renewed concerns of recession and bolstered calls for further rate cuts from the Bank of Canada.
Commodities were mixed. Energy drifted lower led by Brent oil and heating oil. Grains saw a large move higher as wet weather conditions and bullish USDA reports drove short covering across the complex.
Currency markets were choppy this month as the U.S. dollar took a pause in its upward trajectory ending lower this month. Euro had large swings driven by the uncertainty in Greece, while the CAD dollar closed slightly higher.

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