Purpose Total Return Bond Fund July 2016 Commentary

Fund Highlights

  • With very low expectations of a Federal Reserve rate hike priced in for the year, fixed income securities continued to rally.
  • Investors continue their bid for yield as central banks across the world converge to a zero interest rate monetary policy to induce growth.
  • Credit spreads through the high yield and corporate bond space tightened due to continued expectation of cheap borrowing for corporations, improving financial outlooks.
  • High yield bonds were the best performers in July and with a high allocation, the Fund capitalized on this recent trend of tightening credit spreads.
  • There were no changes to allocation in the month as trends in the high yield and corporate bond space persisted. The Fund is currently not exposed to any government grade debt.

Market Commentary
July saw a continuation of a post Brexit relief rally. Although the outcome for European growth was likely long term negative, short term flows outweighed those concerns as investors needed to put money to work. Equities rallied higher with the S&P making new all -time highs, while European markets recovered higher. With central banks keeping rates at exceptionally low levels, the hunt for yield was heightened as investment grade and high yield credit rallied. Commodities experienced weakness led by the energy complex. Crude prices sank over $10 on concerns of a supply glut. As a result, commodity cyclical currencies also saw weakness. Slack Canadian economic data and worries over a housing bubble were additional headwinds for the loonie this month.

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