Purpose US Dividend Fund December Commentary

Fund Commentary

The Fund holds a diversified portfolio of high quality U.S. companies that have shown a capacity to grow and pay their dividends.

The Fund was positive in December. This month the best performing sectors were consumer discretionary, utilities and energy, while healthcare, telcoms and technology were the worst.

The best performing stocks were Staples, Hawaiian Electric and Greif. Staples surged higher after analysts upgraded the stock on rumours that an acquisition of rival Office Depot was in the works. Hawaiian Electric gapped higher after being acquired by NextEra Energy in a stock deal to create a leading clean energy company valued at $4.26 billion. The electric industry has seen considerable consolidation this year and this would be the third largest deal to date. Greif bounced off the year’s lows as it reaffirmed its dividend after a string of lacklustre earnings reports.

The Fund’s worst performing stocks were Cliffs Natural Resources, Abbvie and Philip Morris. Cliffs traded lower on the back of weakness in iron ore after Australia slashed its iron ore price outlook by 33% citing a global inventory glut. Abbvie saw profit taking into year end and was dragged lower with general weakness across the biotech sector. Philip Morris declined this month. Despite boasting one of the largest dividends in the sector, concerns have arisen surrounding its increasing dividend payout ratio and rising debt load.

The portfolio holds 40 U.S. names and hedges USD currency exposure maintaining a net USD exposure at approximately 10% of the Fund’s NAV.

Market Commentary

Markets were volatile into the end of the year. Weak economic data out of Japan, China and Europe dampened the global growth outlook, while heavy selling across Russian equities and the ruble dragged on emerging markets that was reminiscent of 1998. Stock indices fell early in the month as heavy selling across the energy sector and general risk reduction weighed on the broader market. However, the U.S. was the positive global influence as strong jobs and GDP numbers coupled with accommodative language from the Fed helped stem the decline and propel a recovery rally into Christmas.

Commodities saw general weakness into year end with most of the focus still on crude prices which tumbled an additional 19%. OPEC indifference continued to sway markets as the Saudis discounted crude prices for Asian customers and forecasted demand down into 2015.

The U.S. dollar closed out the year at the highs with the Fed on a course to hike rates in 2015. EUR fell to new lows on the year with many expecting the ECB to conduct further quantitative easing in early 2015. Emerging market and commodity based currencies saw weakness throughout December. CAD was no exception closing the year above 1.1600.

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