June was a rocky month for investors, with uncertainty into the Brexit vote taking investors on a wild ride. Even with the conservative positioning of the portfolios, it was a disappointing month, with each finishing in negative territory, and each lagging their respective benchmark.
For a review of our portfolios’ performance, you can download our standard monthly portfolio report. For those looking for even more detail, I am also providing additional reports generated from Morningstar which show even more detail regarding the portfolios. A summary report can be downloaded here, while the more detailed report can be downloaded here.
In early June, many polls were starting to show a slight lead for the leave side, which rattled investor confidence, resulting in a meaningful market selloff. As the vote approached, sentiment appeared to have shifted, pushing markets higher in anticipation of a stay vote. Then, on June 23, the unthinkable happened, and the UK voted to leave the EU by a slim 52/48 margin.
The selloff was swift, with equity markets around the world selling off sharply, while safe haven investments like bonds and gold were rallying higher. In the days after, cooler heads have prevailed, and most markets have regained some ground, and in the case of the U.S. markets, have continued to reach record highs.
Within the portfolios, there were two main headwinds. The first was the conservative positioning of our fixed income holdings. When the bond market rallied, our holdings, with the shorter duration strategy were largely left behind. Another headwind was our foreign exposure. The S&P 500 eked out a modest 0.3% rise on the month in U.S. dollar terms, but when the rise in the U.S. dollar was taken into account, investors were actually negative by more than 1.2%. This was felt even more in non-North American markets where the losses were meaningful, and the falling Canadian dollar added to it.
Despite the struggles of June, I believe the portfolios remain well positioned, providing a nice balance between the overall risks, and the potential return. I remain confident in each of the underlying funds, but will continue to monitor them, as well as each of the portfolios for a meaningful erosion in the risk reward metrics.