Tuesday December 17th, 2013
In November, markets focused on the transition of the Chairman of the Board of Governors of the Federal Reserve System from Bernanke to Yellen. Markets reacted positively from Yellen’s dovish comments and U.S. Equities performed well across the board with the Dow and S&P 500 hitting new all time highs. Looking forward, closely watched economic data indicate higher odds of tapering, with the street consensus expressing concern over a risk of correction. High yield names were quite volatile after better than expected October payroll and GDP data caused U.S. yields to return to recent highs.
The Canadian dollar weakened approximately 2%, breaching the 1.06 level for the first time since 2010. Weakness in the exchange rate was driven by analyst projections for USD/CAD to reach 1.15 based on their expectations of widening interest rate differentials and lower commodity prices into 2014. The bearish commodity story expanded by a further rout in precious metals equities and physicals, with the iShares Gold Trust (GLD) down 5.39%, and iShares Silver Trust (SLV) down 10.28% in November. We expect a further decline in these underperforming equities caused by year-end tax loss selling.
The Fund’s negative performance was attributed to the broad selloff in Metals and Real Estate. One sector that did perform well was Agriculture, which saw a gain of 2%. The Fund had approximately 12% in direct commodity exposure, in which Soy rose 5% and Corn, Crude Oil and Copper declined 2.37%, 4.29%, and 4.54%, respectively. At the end of the month, the Fund was rebalanced and increased it’s exposure to Agriculture, Base Metals and Energy. The remaining sectors were left relatively unchanged.