Purpose Monthly Income Fund December Commentary

Market Commentary

December saw Bernanke’s last Fed meeting on December 18th that unveiled the tapering program. The market reacted positively to the slow pace of tapering, as U.S. equities rallied into the holidays with the DJIA and S&P hitting new highs. USD/CAD continued its upward trajectory, breaching the 1.07 level by month end. Precious metals sold off again this month. Gold was down approximately 3.75%, and silver was down almost 2.75%, with gold equities performing poorly as investors unwound their holdings. On the other hand, base metals performed well in December as copper was up 1.78%. Looking ahead to 2014, there is improving economic data, along with the likelihood of a U.S. budget deal early in the year. This should point towards higher equity markets, strengthening USD versus CAD and weaker commodity markets. We expect commodities to remain pressured until we see growth signals from China or higher inflation forecasts.

Fund Commentary

The Fund has an income allocation to bonds and high-dividend equities, and has a real asset allocation for purchasing power protection. The dividend equities and real asset allocation drove positive performance, while the bond allocation dragged down total returns. The best performing sectors for our income equities were information technology, industrials and energy, while the worst performing sectors were telecom, utilities and financials. Among real assets, gains in real estate investment trusts and base metals offset losses in agriculture and energy. The bond allocation, which is concentrated in corporate credit, was pressured by the U.S. Fed tapering policy.
USD exposure is hedged. The Fund declared a dividend in December of $0.083/share across the ETF and mutual fund series. The Fund was also approved to hold Purpose High Interest Savings (TSX: PSA) in lieu of cash, and now holds the majority of its cash in PSA.

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