May 2013 Market Recap

Fed Uncertainty Pushes Yields Higher

Bond yields moved sharply higher across the board on rumours that the U.S. Federal Reserve would be ending their massive quantitative easing plans sooner than many had expected. Yields on the benchmark ten year government bonds rose on these rumblings, with the Canadian ten year moving from 1.69% to 2.06%, and the U.S. ten year rose to 2.16% from 1.87%. This   caused a selloff in the bond markets, with the DEX Universe Bond Index falling by more than 1.5%. Long bonds and real return bonds, with their longer durations were hit the hardest, while shorter duration and corporate and high yield bonds held up relatively well.

While the timing of this bump in yields may have been a bit of a surprise, the fact that they did move higher shouldn’t be. Still, even if yields move higher, we don’t expect that the U.S. Federal Reserve or the Bank of Canada will move to raise rates anytime soon. While the economic fundamentals are improving in the U.S., they are stagnating in Canada, leaving the Bank of Canada little room to move. With this backdrop, we expect some continued short term volatility in the fixed income markets, and recommend that investors shorten the duration of their fixed income holdings and move out into the corporate bond space. The higher yields offered by corporate bonds will provide better downside protection when yields move.

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May Fund Ranking Report

Each month, we analyze more than 1200 mutual funds, pooled funds, and hedge funds putting them through our proprietary quantitative valuation model. We then prepare our Monthly Fund Ranking Report which rates and ranks each of the funds in our universe.

You can download our May 2013 Investment Fund Ranking Report here.

May Socially Responsible Investing Report 

With environmental and human rights concerns becoming more important to people, interest in the Socially Responsible Investing segment has never been stronger. In an effort to help keep investors and advisors informed on the SRI funds available, we have created our monthly Socially Responsible Investing Fund Report, which will be published on a monthly basis.

You can download the May 2013 Socially Responsible Investing Report here.

May WRAP Funds Report 

Fund of Fund or WRAP funds have consistently led the mutual funds sales stats in the past few years. Investor and advisor interest in the products are at an all time high, given the unprecedented levels of market volatility and uncertainty that is prevalent in the markets today. To help you zero in on the best WRAP funds available, we have created our new Monthly WRAP Funds Report that will be published on a monthly basis. If there is a WRAP fund that you would like to see added to this report, please contact us and we will add it for our next edition.

You can download the May 2013 WRAP Fund Report here.

May Portfolio Review 

The winning streak continues, with all portfolios posting gains in May. Surprisingly, even the fixed income heavy Conservative portfolio was up, rising a modest 0.14% in the month, the tenth positive month in a row. It also handily outpaced its benchmark as the PH&N Bond and Manulife Strategic Income funds held up better than the DEX Bond Universe. The equity funds were all positive contributors to performance.

Each of the other portfolios were also positive, for the tenth month in a row. It was the same story with the equity funds, particularly the Mackenzie Ivy Foreign Equity and CI American Value Fund that were the main contributors to both the absolute and relative returns.

The TD Real Return Bond and the Dynamic Global Real Estate funds were the only that were unable to keep pace with their benchmarks during the month. All things considered, it was another very encouraging month for the portfolios.

The portfolios continue to post returns that are within expected ranges based on the risk reward profile of each portfolio.

You can download our detailed Portfolio Review here.