Purpose Total Return Bond Fund December Commentary

Purpose Total Return Bond Fund December Commentary

Fund Highlights

  • The Fund was negative this month on the back of high yield exposure as the ‘Lift Off’ in the U.S. priced in expectations of higher rates and energy credit spreads opened up further on crude oil weakness.
  • With crude oil weakness and concerns of economic slowdown looming, the Bank of Canada’s outlook remained dovish helping government bonds and investment grade bonds rally.
  • The Fund decreased position in high yield to 15% while increasing investment grade corporates to 27% and government bonds to 13%.
  • With a large cash position at 46% at month end, the Fund is very defensively postured in face of a gradual and data dependent hike path according to the FOMC.

Market Commentary

Stocks and bonds ended lower in December to close out generally choppy performance for 2015.[Add sentence or 2 on 2015 market performance for U.S. equities, Canadian Equities, MSCI EAFE (local currency) and Canadian Fixed Income and oil and gold.] The main focus this month was on the FOMC decision. After another solid U.S. job number gave the green light for “lift off” the Fed delivered by hiking rates by 0.25% for the first time in a decade. The Fed went on to assuage concerns over the pace of future hikes by promising that the path would be gradual and data consistent. In Europe, Draghi underwhelmed on the extent of rate cuts and further QE measures which sparked a sharp rally in the Euro and European yields. In Asia, Chinese growth concerns resurfaced as the central bank allowed the yuan to weaken to its lowest level in over 4 years. In commodities, oil sold off further to new lows on the year after OPEC maintained its current production rate which disappointed potential expectations for a potential supply cut. Canada traded poorly on the back of this as the loonie and the S&P/TSX both sold off to end the year.

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