Wednesday September 10th, 2014
Early in the month, geopolitical issues worried markets as conflict in Russia/Ukraine and Gaza continued unabated, while U.S. military action escalated in Iraq. Nonetheless, markets eventually shrugged off these concerns, and resumed dip buying which propelled U.S. and Canadian markets to all-time highs. After much fretting over the recent strength of U.S. data, payrolls came in slightly less than expected. At Jackson Hole, Yellen continued to voice concern over labour market slack, which helped calm the hawkish calls and provide a relief rally for rates. Corporate earnings for Q2 were generally positive and GDP growth figures were also solid. In Europe, weak economic activity was troubling for the recovery and spurred more calls for further accommodative action from the ECB.
In commodities, crude sank lower despite the turmoil in Russia and the Middle East. Supply overhang, coupled with declining Asian demand, were headwinds for energy prices. Gold and copper declined while grains staged a slight bounce off the lows.
In the credit markets, high yield had a dramatic bounce from July’s sell-off, as investors stepped in and bought the dip.
The U.S. dollar continued to see strength against most major currencies, however the loonie was able to buck the trend. Strong Canadian jobs data and M&A flows provided a tailwind for CAD strength during the month.
The Fund holds a risk-balanced portfolio diversified across agriculture, energy, base metals, precious metals, and real estate.
The Fund was positive during the month of August. The Fund’s strognest return contribution came from equities, while commodity positions ended lower. In particular, REITS rallied along with broader equity markets. Physical commodities were challenged by supply overhang, the strong U.S. dollar and softer copper demand from China. Despite continued geopolitical tensions, crude fell on weak Asian demand and higher supply out of Libya, Nigeria and the US. Grains continued to trade near the year’s lows with large supply providing an overhang.