SIC Multi Asset Institutional Composite

  March 2019 Year to Date
SIC Institutional 1.9% 8.3%
Benchmark* 2.2% 7.9%

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

Global capital markets continued to roar ahead in March as a favourable combination of encouraging US/China trade talks and a sidelined US Federal Reserve buoyed investor sentiment.  For the month, the biggest surprise was the strength seen in fixed income.  The total return for the Canadian Bond Composite in March was 2.4%, which was more than double the 1.0% monthly return for the S&P TSX Composite Index.  Once again, the US led global equities in March with a 3.5% return for the S&P 500.  For the month, our underweight position in fixed income negatively impacted returns for the SIC Multi Asset Institutional Composite relative to the benchmark.  For the quarter, however, Institutional returns exceeded the benchmark despite our below average commitment to Canadian equities and bonds.

The investing climate should remain positive for equities in the second quarter – particularly for international equities, given their attractive valuation metrics relative to US equities.  At current interest rate levels, fixed income, as an asset class, is producing negligible real returns.  This suggests that the effectiveness of monetary policy may have run its course.  Under these circumstances, it follows that large-scale fiscal spending (most likely focused on infrastructure), financed with cheap government debt, may take centre stage as the “new thing” over the next 18-24 months.  Mega project government spending would further support our positive bias to value-oriented cyclical international stock indexes.    

Terry Shaunessy
James Garcelon