Purpose US Dividend Fund October Commentary

Fund Highlights

  • The Fund had an exceptional month as investors returned to a growth rally on the back of the U.S. Fed’s decision to leave benchmark rates unchanged.
  • The market experienced gains in cyclical sectors in mega-cap securities indicating a preference for cyclical growth.
  • Overweight positions in cyclical sectors such as energy and materials helped the Fund record strong gains this month with all sectors being positive for the month.
  • Dow Chemicals was the best performing name with massive appreciation of ~19% and Nu Skin Enterprises was the worst performer losing ~9.7%. As expected, the financial names lagged as the rate hike did not materialize.
  • With respect to the currency-hedged units, the Fund continued to hedge U.S. dollar currency exposure maintaining a net U.S. dollar exposure of approximately 7% of the Fund’s NAV.

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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