September 2013 Market Recap

Lack of taper announcement pushes markets higher

As we entered September, investors were focused on the September meeting of the U.S. Federal Reserve’s Open Market Committee. The consensus was that this meeting would be when the Fed chair Ben Bernanke finally announced that they would begin to slow the pace of their massive bond buying program, signaling the beginning of the end for low interest rates. Traders were widely expecting a cut of between $10 billion and $20 billion per month.

Then, Mr. Bernanke did the unthinkable and did not announce any tapering. The results were almost immediate, pushing equity markets higher, and bond yields lower. This should provide some idea of what is really driving markets these days – liquidity. It is certainly not economic fundamentals, because if it were, then we likely would have seen a selloff when no tapering announcement was made.

The Fed having to taper their bond purchases is an indication that the economy is on the right track. Instead, by not tapering, they are effectively saying that the economic recovery is not strong enough to sustain itself without the aid of monetary stimulus. Others point out that Mr. Bernanke may have not pulled the taper trigger this time around for fear of the economic fallout of the government shutdown and debt ceiling negotiations.

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September 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 September 2013 Investment Fund Ranking Report here.

September 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 September 2013 Socially Responsible Investing Report here.

September 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 September 2013 WRAP Fund Report here.

Portfolio Review 

Global equity markets were positive after the U.S. Federal Reserve shocked the markets and did not implement any tapering to their massive bond buying program. Expectations that a taper of between $10 and $20 billion would be announced at the September meeting. With no taper on the immediate horizon, both bond and equity markets rallied higher.

Each of our portfolios was in positive territory in September. Our Conservative portfolio gained 0.7% while our Growth portfolio gained 1.5%. Despite the pullback in yields, two of our bond funds were in negative territory. The Manulife Strategic Income Fund lost 0.75% during the month in Canadian dollar terms. However, this loss can be attributed to the gain in the Canadain dollar, because the fund was up by more than 1.8% in U.S. dollar terms. The TD Real Return Bond Fund was the other laggard in the portfolios, losing 0.20% in the month, as inflation protected bonds in general were hit on lowered inflation expectations.

The portfolios continue to deliver risk adjusted returns that are significantly stronger than their respective benchmarks. Their absolute return levels are well within our expected ranges based on the risk reward profile of each portfolio.
You can download our detailed Portfolio Review here.