SIC Multi Asset Institutional Composite

December 2018

Year to Date

SIC Institutional

-2.7%

-3.7%

Benchmark*

-2.4%

-1.6%

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

Investor sentiment took a turn for the worse in December as global trade worries and uncertainty with respect to the future path of interest rates resulted in dramatic daily market volatility and lower index values.  As highlighted in the table above, there was very little difference between the SIC Multi Asset Institutional Composite and benchmark returns for December.  As a consequence, we were unable to make up any ground on our year to date underperformance and finished the year approximately 2% behind the benchmark.  2018 is the first year in the 10-year history of the SIC Institutional Composite that we have trailed the benchmark.

Looking to 2019, we are considerably more positive on the investment prospects for global equities than the current market consensus.  We believe that the 5% plus decline in the fourth quarter in global equities more than adequately discounts the potential for slower economic and earnings growth over the next 12 months.  Moreover, much of the damage to the S&P 500 was a result of the reversal of overly confident valuations for the FAANG and other US technology stocks that resulted in a historically high weighting for the technology sector (greater than 25%).  The last time technology weighed in at plus 25% of the S&P 500 was in early 2000. This was right before the “Tech Wreck”.  As is frequently said, history does not repeat itself, but it often rhymes.  We expect a much more broadly-based rally (on both a sector and regional basis) for equities in 2019.

Terry Shaunessy
James Garcelon