SIC Multi Asset Institutional Composite

 

May 2018

Year to Date

SIC Institutional

1.0%

1.7%

Benchmark*

1.3%

1.4%

* 5% T Bills, 35% Canadian Bond Composite, 20% TSX Composite TRI, 20% S&P 500 C$ TRI, 20% MSCI EAFE (Net) C$ TRI

 

The SIC Institutional Composite increased by 1.0% in May, which was slightly below the monthly return for our benchmark.  On a year to date basis, we remain marginally ahead of our benchmark.  Overall asset class returns have been unremarkable year to date as stock, bond and currency markets struggle to gauge global economic prospects in an environment of rising interest rates and trade tensions.

For the second consecutive month, the S&P TSX Composite was a winner having gained 3.1%.  The energy sector did well led by Suncor as did industrials, reflecting gains in Bombardier and the rail stocks.  Despite reporting good second quarter results, the Canadian financial sector lagged the overall market.  Could this be a harbinger for the rest of the year?  The S&P 500 was also up over 3% for the month with the FAANG stocks doing most of the heavy lifting.  The MSCI EAFE Index performed poorly in May declining 1.4% while Emerging Markets were hit hardest falling 2.7% on a surging US dollar.

As we head into the summer months, both the US Federal Reserve and Bank of Canada are expected to raise short term interest rates.  With so many balls in the air (rising interest rates, global trade issues, European politics and Trump Tweets) capital markets are likely to remain on edge and turbulent. We have not altered our portfolio strategy: minimum fixed income and maximum equities with a gradual move away from an overweight in US equities.  We expect Canada to lag as the oil rally fades on higher production.  Further Canadian dollar weakness is expected in the second half of the year as interest rate differentials between the US and Canada widen.

 

Terry Shaunessy
James Garcelon