Purpose Core Dividend Fund November Commentary

Purpose Core Dividend Fund November Commentary

Fund Highlights

  • Dividend equities pared back outperformance over the past two months with a weak November after experiencing heightened volatility over recent months.
  • U.S. dividend yielders continue to outperform their Canadian counterpart as the U.S. broad market outperforms Canada. S&P500 returned 0.3% in November compared to the -0.15% for the S&P/TSX60. The Fund continues to overweight Canadian exposure, deeming Canadian securities better value.
  • Financials was the best performing sector in November leading up to the U.S. Fed’s rate announcement, with many REIT holdings contributing positively to the Fund.
  • Agrium was the strongest performer in November as higher volumes and lower operating costs drove the stock up 10%.
  • Enbridge was the worst performer with missed earnings amid deteriorating energy markets.
  • TD Bank was replaced in the portfolio; the stock has been carried in the Fund since inception providing consistent profits for the Fund. However, the stock is now too expensive on a relative value basis and was replaced by American pulp and paper giant, International Paper Co.
  • 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.

Market Commentary

Markets consolidated after experiencing heightened volatility over the last 3 months. The terror attack in Paris and the U.S. Thanksgiving holiday gave markets time for pause, especially ahead of an event filled December where the FOMC, ECB and OPEC all have significant meetings to close out the year. In the U.S., payroll data came in stronger than expected which fueled market expectations for a December rate hike. Despite the prospect for higher rates, the yield curve flattened as the Fed signaled a “dovish hike” and a gradual rise through 2016. Canada saw sluggish economic data as cyclical sectors continued to experience a gloomy outlook with no imminent signs of easing. Commodities faced further weakness as crude and copper fell over 10% for the month. In currencies, the loonie fell 2% as the U.S. saw broad strength. European equities outperformed while the Euro sold off near the lows of the year, as markets anticipated further dovish measures from the ECB.

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