Purpose Core Dividend Fund September Commentary

Fund Highlights

  • The Fund outperformed the broad market as dividend yielding securities outperformed due to the U.S. Fed decision to leave benchmark interest rates unchanged. Investors flocked to safe haven assets on renewed concerns regarding global growth.
  • Dividend yielding securities in the U.S. outperformed those in Canada as the U.S. market found a closer floor to current valuations. Investors had previously been selling off dividend securities in anticipation of a rate hike. The Fund is currently overweight Canada due to more attractive relative valuation of Canadian equities relative to the U.S.
  • Defensive sectors were the best performers as utilities, consumer staples, and real estate experienced gains. The Fund benefitted from overweight positions in these sectors. The worst performing sectors were energy and materials.
  • PPL Corp. was the best performing stock as utilities rallied in tandem with sinking bond yields. Potash Corp. was the worst performing name as fertilizer prices experienced a global slump which pressured margins and brought into question the sustainability of its dividend.
  • The Fund continued to hedge U.S. dollar currency exposure maintaining a net U.S. dollar exposure at approximately 7% of the Fund’s NAV.

Market Commentary

Global markets continued to experience volatility in September with major global equity indices ending lower on the month. China remained in sharp focus as declining manufacturing and worsening economic data stoked further deflationary fears. Over the past year, the Fed has prepared the market for an imminent interest rate hike, however they stood still on rates this month citing global economic and financial developments that put further downward pressure on inflation in the near term. With much uncertainty surrounding the outlook for global growth, risk was pared back notably across cyclical sectors. Commodity prices fell led by energy and metals. In currencies, commodity currencies were broadly sold with the loonie making new lows on the year.

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