Purpose Monthly Income Fund October Commentary

Fund Highlights

  • The Fund experienced positive returns from all three asset classes in October as global markets rallied despite growth concerns.
  • Fixed income was positive with the run to risky assets that helped high yield bonds to rally. Previously accumulated gains in government and investment grade holdings experienced minor drawdowns. The Fund transferred assets from investment grade holdings into cash and is now very defensively postured in the face of a volatile fixed income environment.
  • Dividend equities performed amid a flight to risky assets. Energy and materials were the best performing sectors, while utilities wavered down the gains from defensive positions that had been built up in September. Dividend equities are currently overweight in favour of Canada where securities are priced relatively inexpensive to U.S.
  • Real assets were the best performing sleeve this month due to a rally in energy and materials. As market expectations stabilized, real assets found a floor and gained ground on being previously oversold.
  • 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 rebounded higher in October retracing most of the losses seen in the August correction. The primary catalyst for the move higher in markets was the lowering of expectations for a Fed hike in 2015, as the FOMC remained on hold in October. Sentiment appeared to shift positive despite a global economic backdrop which continued to look weak. In the US, retail sales and ISM trended lower while payrolls disappointed to the downside. Canada saw a majority Liberal victory as well as slightly positive Q3 GDP, however the Bank of Canada remained neutral continuing to downplay the outlook for the economy. European and UK PMI’s were weak, while China reported a slowdown in import activity.

This month there was considerable short-covering across the commodity cyclical complex. Crude oil rallied higher while equities were led higher by energy and materials. Emerging market currencies which were overextended to the downside the previous month were able to recover significantly in October. The CAD dollar rallied 1.8% on the back of a majority Liberal victory and stronger oil prices.

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