Purpose Total Return Bond Fund October Commentary

Fund Highlights

  • The Fund ended positive this month as volatile interest rate expectations took their toll on the fixed income market.
  • Risk assets rallied in October with worsening economic data pushing out expectations for a rate hike and global central banks putting up a dovish front. High yield was the best performing sector while investment grade bonds and government bonds ended flat.
  • The Fund continues to tactically allocate to trending sectors of the fixed income market. In October, the Fund increased cash allocation by ~20%, liquidating part of the position in investment grade corporate bonds.
  • Facing a challenging and volatile fixed income environment, the Fund has a very defensive posture for the coming month.

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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