Thursday October 17th, 2013
Risk assets around the globe experienced volatility surrounding the mid-month FOMC meeting, which caught much of the market by surprise when the Fed held off on tapering quantitative easing. After preparing markets over the past months for the beginning of tapering, the Fed ultimately decided that recent data, in particular a weak August jobs figure, was not strong enough to warrant a reduction in stimulus. As a result, equities rebounded higher, with the S&P briefly making new all time highs before giving up some of its gains into month end. The U.S. dollar saw weakness, and U.S. yields sank lower after briefly testing 3% on the 10yr U.S. Treasury. Middle East tensions waned, as a diplomatic approach prevailed, which saw a reversal in safe haven flows across energy and gold. China’s economic data was positive showing signs of stabilization, which helped emerging market assets recover higher after a quarter of weakness. The Bank of Canada maintained a tightening bias, even though economic indicators have kept current policy rates at 1%. This is consistent with most central bankers who have repeated their commitment to keeping rates at current levels for an extended period of time.
Purpose Monthly Income Fund was positive for September as both the dividend equity and real asset strategies were positive. The total return bond strategy, after dividends, was slightly negative. Top performers for the fund were Finning International and Bristol-Myers Squibb. The bottom 3 performers were crude oil, corn and gold.
Fixed income exposure was lightly deployed with a focus on high yield exposure. In the dividend equity strategy the fund is diversified across all 11 sectors, with the heaviest allocations to the Energy, Financials, and Real Estate sectors. Exposure in Technology, Consumer Services, and Industrial Products was low, reflecting the availability of names that are both high dividend payers and of sufficient fundamental quality. In the real asset strategy, the top performers were equities in the Materials sector, while the worst performers were oil futures and gold and silver ETFs.