Purpose Total Return Bond Fund September Commentary

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.

The Purpose Total Return Bond Fund’s portfolio is approximately two-thirds in cash with the remaining one-third in high yield bonds. This posture is very conservative on duration due to bearish medium-term trends in yield, but bullish on credit. September’s positive performance was driven by the Fed’s dovish actions coming out of the mid month FOMC meeting causing U.S. yields to trend lower and credit spreads to tighten.

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