SIC Multi Asset Institutional Composite

  August 2019 Year to Date
SIC Institutional -0.6% 9.3%
Benchmark* 0.4% 10.8%

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

Global trade worries, Hong Kong unrest and a flurry of Trump tweets combined to produce extraordinarily volatile global capital markets in the month of August.  Many investors simply capitulated – selling stocks and buying bonds.  They did so irrespective of already historically low or non-existent bond yields and in such numbers, that the bond index (+1.9%) significantly outperformed global equities (-1.0%). Economically sensitive sectors (industrials, materials, energy) and geographic regions (emerging -3.8%) as well as domestically focused US small cap equities (Russell 2000 -3.9%) made fresh new lows despite already having had dismal returns year-to-date.  Our underweight in fixed income and overweight in equities caused the SIC Multi Asset Institutional Composite to underperform the benchmark on both a monthly and year-to-date basis. 

In our opinion, global capital markets are currently discounting a recessionary environment to such an extent that if political or economic circumstances improve, many investors will scramble to reposition equity commitments.  We find it hard to believe that politicians will not undertake more stimulative fiscal policy, in addition to already accommodative monetary policy, in an effort to combat slowing economic growth and poor investor psychology.  Consequently, we see an overly conservative asset mix as being the biggest risk to future portfolio returns.  

Terry Shaunessy
James Garcelon