Purpose Total Return Bond Fund August Commentary

Fund Highlights

  • In line with the market, the Fund was negative in August as high yield and investment grade bond positions were negatively affected by risk aversion in the market, driving outflows and widening credit spreads.
  • In the U.S., GDP surprised to the upside with a growth rate of 3.7%. However, mixed messages from various Fed officials caused uncertainty as to the timing of a potential interest rate hike. In Canada, tepid economic data and low crude prices ensured that the BOC would maintain a dovish outlook.
  • This month, the Fund decreased high yield bond positions from 46% to 24%, increased corporate investment grade bond positions from 28% to 47%, and increased government bond positions from 12% to 24%.

Market Commentary

Markets experienced a tumultuous decline this month as concerns over a slowdown in global growth and persistent worries over deflation triggered a dramatic fall in global equity prices. The S&P sank 6%, the SPTSX fell over 4% and the VIX fear gauge spiked to levels not seen since the crisis back in 2009. China was in the headlines as worsening economic data and a volatile stock market decline proved unnerving to investors. A surprise devaluation in the Chinese yuan shocked markets and provoked suspicions that the world’s second largest economy was in more distress than official figures might suggest. In the U.S, GDP surprised to the upside with a growth rate of 3.7%, however mixed messages from various Fed officials caused uncertainty as to the timing of potential interest rate hikes. Crude oil was extremely volatile, initially falling below $40 before spiking 25% in 3 days after OPEC suggested that they might be willing to discuss achieving “fair prices.” Currencies were mixed with most commodity and emerging currencies continuing to struggle vs the U.S dollar. CAD weakened off to new lows on the year, while euro and yen managed to rally.

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