Purpose Core Dividend Fund May Commentary

Market Commentary

The month of May saw equity markets reach new highs as central governments reiterated their commitment to low rates for a prolonged period of time. Geopolitical concerns in the Ukraine seemed to subside, and Russian equities rebounded. The benign macro environment caused volatility to sink to multi-year lows across most major asset classes. The U.S. continued to see improving indicators in employment, new orders, inventories and housing starts which pointed towards accelerating growth. China data continued to show weakness across purchasing and export data. The ECB is expected to launch additional easing in June where they hope to target deflation with near zero rates.
In commodities, energy and industrial metals gained, while agriculture and precious metals declined. Specifically, gold and silver declined as investors left safe haven investments and rushed back to the equity and high yield debt markets. The Canadian dollar strengthened against the U.S. dollar, ending the month around 1.08. Currency strategists forecast a weaker Canadian dollar in the 1.15 range by the end of the year.

Fund Commentary

The Fund gained in the month of May as equity markets continued to outperform. The best performing sectors were consumer staples, telecommunications and financials, while the worst performing sectors were utilities, materials and energy.

The best performing stocks were Lorillard, Reynolds America and Telus Inc. Lorillard continued to outperform on speculation of consolidation in the industry with Reynolds, a possible suitor, also outperforming. Telus was up after strong Q1 earnings were reported with better than expected subscriber growth. Their decision to end plans to bid for Mobilicity also had a positive effect on the stock.
The Fund’s worst performing stocks were Teck Resources, Great West Life and Integrys Energy. Teck Resources underperformed as low coal prices, weak margins and a high cash burn weighed down the company’s fundamentals. Great West Life was down this month as their earnings showed that their Putman division continued to struggle. Integrys Energy declined after they missed earnings estimates on weaker than expected retail electric margins.

The Fund completed its quarterly rebalance and maintained its U.S. holdings at 45% of the Fund. The Fund added Camden Property Trust, Ingredion, Lyondellbasell, Tim Hortons and George Weston Inc and sold its positions in BCE, Meadwestvaco, Philip Morris Intl., Riocan REIT and Rayonier.

The rebalanced portfolio holds 18 U.S. equities and 22 Canadian equities, and continues to hedge U.S. dollar exposure, maintaining a net U.S. dollar exposure at approximately 10% of the Fund’s NAV.

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