SIC Multi Asset Institutional Composite
|September 2020||Year to Date|
* 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
Historically, September is a month which is characterized by high volatility and generally poor performance. This year was no exception as both the SIC Multi Asset Institutional Composite and the benchmark declined by just under 1% for the month. Of particular note was the decline in North American equity markets. The S&P TSX Composite fell 2.1% led by what looks like capitulation selling in the energy sector (-17.5%) and the S&P 500 fell 3.8% (in US dollar terms) led by profit taking in the FAANG stocks. The All Cap World Index excluding the US was slightly negative for the month. It fell 0.2% (in Canadian dollar terms) but performed well ahead of North American indices for the first time this year.
We will be rebalancing the Institutional Composite in October with the intention of trimming US exposure and raising our Canadian equity commitment. The valuation gap between the S&P 500 and the S&P TSX Composite has become significant making this shift quite compelling. Following this rebalance, we will be neutral US, overweight international and slightly underweight Canadian equities. Overall, fixed income allocations will remain modest and total equities will remain above the benchmark. With the US elections pending and ongoing concerns with respect to the economic effects of the COVID-19 pandemic, volatility will remain elevated in the fourth quarter. However, near zero interest rates and outstandingly generous fiscal policy should assuage investor sentiment.