October 2013 Market Recap

Despite U.S. government shutdown, global markets rally higher

Historically, October has been one of the most volatile months   for equity markets, and this year looked to be no different. The stage was set for a bumpy ride as continuing uncertainty over the prospect of the U.S. Federal Reserve slowing the pace of its bond buying program weighed on investors. Adding fuel to this potential flame was the high stakes game of chicken playing out between the Republicans and Democrats that led to a 16 day shutdown of the U.S. government and raised the possibility that the U.S. could default on its debt.

Despite these looming threats, investors largely shrugged them off as inconsequential as global equity and bond markets rallied higher. The S&P/TSX Composite Index gained 4.7%, while the S&P 500 was up 4.6% and the MSCI EAFE Index gained 3.4%. The Canadian dollar fell from $0.9723 U.S. to $0.9589, which helped to boost the returns for Canadian investors.

Liquidity has been one of the reasons that markets have rallied, and there was much positive news on that front in October. The Fed once again held their bond buying program steady, while many global central banks kept their monetary policy very accommodative. Markets also rallied on news that U.S. President Barrack Obama would name Janet Yellen as Ben Bernanke’s successor as the Chair of the U.S. Federal Reserve. Ms. Yellen has been quite dovish in her views on monetary policy, and her appointment makes it very likely that it will be at least early 2014 before there is any serious talk   of tapering.

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October 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 October 2013 Investment Fund Ranking Report here.

October 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 October 2013 Socially Responsible Investing Report here.

October 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 October 2013 WRAP Fund Report here.

October Portfolio Review 

Investors shrugged off any potential economic fallout from the U.S. government shutdown and took equity markets higher in October. The Canadian dollar weakened compared with the U.S. greenback, which further boosted returns for Canadian investors.

Each of the portfolios was firmly in positive territory during the month, led by the Growth Portfolio which gained 3.9%. The Conservative Portfolio gained a more modest 2.2%.

While the portfolios made money, the all failed to keep pace with their respective benchmarks during the month. This is not unexpected. I have built the portfolios with an emphasis on managing risk and providing decent downside protection. Many of the funds in the portfolios, namely Mackenzie Ivy Foreign Equity, CI Harbour, and to a lesser extent Trimark U.S. Smaller Companies place a significant emphasis on quality companies. This tends to result in portfolios that will hold up better when markets drop, but will unfortunately lag when markets rally higher.

That said, I still monitor the performance on an absolute, relative, and risk adjusted basis to ensure that the portfolios continue to perform within expectations. As of October 31, 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.