Tuesday February 17th, 2015
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 negative in January with U.S. stocks generally underperforming Canada and Europe. Global bond yields fell this month as central banks increased accommodative policies to fend off deflationary pressures. The Bank of Canada was no different as a surprise rate cut sent Canadian yields to all-time lows and caused the loonie to plunge 8.7%. This had a material positive impact on PUD.B which benefitted from its unhedged USD exposure.
Dividend names saw relative outperformance as investors sought out higher yielding assets. The best performing sectors were utilities, staples and telecoms while industrials, consumer discretionary and energy sectors were the worst. The Fund`s top names were Meadwestvaco, Scana and Consolidated Edison while the worst names were Greif, Mattel and Cliff`s Natural Resource.
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.
Markets were volatile this month as central bank activity dominated most of the headlines. Deflation worries spurred the ECB to initiate a Euro 1.1 trillion stimulus package targeting the purchase of sovereign debt. The Bank of Canada shocked the market with a 25 bp rate cut citing recent weak economic data and concern over the negative effect of plummeting oil prices. The Swiss national bank roiled financial markets when it removed its long held peg versus the euro triggering a historic 20% move higher in the Swiss franc. This month European equity markets were the strongest performers on the back of the ECB action. U.S. markets ended down 3% and the S&P/TSX closed slightly positive. Commodities continued to experience weakness this month. The energy sell off extended lower as crude fell another 10%. Copper fell 13% to 5 year lows on declining demand and worse than expected economic data in China. Precious metals bucked the trend as gold rallied on safe haven flows. Currency markets were extremely volatile this month as central banks drove large moves. The dollar continued to see strength versus the Euro and other commodity currencies. Canada was the worst performing G10 currency falling 8.7% after the BOC’s surprise rate cut.