Purpose Monthly Income Fund June Commentary

Fund Highlights

  • The Fund had a negative return in June, with all three asset classes posting losses for the month.
  • In equities, consumer discretionary and health care names were the only positive performers. Interest rate sensitive names across utilities and real estate underperformed as U.S. yields rallied higher in anticipation of U.S. Fed hikes later this year. Materials and energy also lagged this month.
  • In fixed income, U.S. high yield was the worst performer this month as general risk aversion and concerns over higher U.S. rates helped drive outflows. Canadian corporate credit and government bonds were slightly negative. Weak Canadian data renewed concerns of recession and bolstered calls for further rate cuts from the BOC which was supportive for bonds.
  • Returns for real assets were negative as well, with agricultural commodity exposures being the only exposures with positive returns for the month. Soybean and soybean meal futures spiked higher as the market experienced extensive short covering after poor weather conditions dampened the outlook for crop yields. Metals positions underperformed as gold, silver and copper were all down.

Market Commentary

Markets ended lower this month as global geopolitical risks weighed on risky assets. Greece was an overhang on the Eurozone as probability rose that it would default on IMF loans due at the end of the month. The Greek government also shut down local banks and called a surprise referendum which heightened uncertainty. In the U.S. , jobs data came in stronger than expected which put the U.S. Fed on a path to raise interest rates later this year. However, despite the dovish FOMC comments U.S. bond yields continued higher causing volatility across interest rate sensitive assets. In Canada, economic data was mixed as better than expected jobs numbers were offset by weaker GDP and retail sales. This soft data renewed concerns of recession and bolstered calls for further rate cuts from the Bank of Canada.
Commodities were mixed. Energy drifted lower led by Brent oil and heating oil. Grains saw a large move higher as wet weather conditions and bullish USDA reports drove short covering across the complex.
Currency markets were choppy this month as the U.S. dollar took a pause in its upward trajectory ending lower this month. Euro had large swings driven by the uncertainty in Greece, while the CAD dollar closed slightly higher.

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