November 2016 Portfolio Review

Posted by on Dec 14, 2016 in Paterson Portfolio Review | 0 comments

With Trump’s surprising election win, North American equity markets have been on a tear, with the U.S. markets hitting new highs, and the Dow Jones Industrial Average flirting with the 20,000 mark. European and emerging markets have not fared as well, with Europe losing ground on internal issues, and emerging markets selling off on fears that a new protectionist U.S. regime will hurt the region’s growth prospects.

While equity markets have celebrated, fixed income markets have not. With worries that Trump policies will spur inflation and economic growth, bonds, both in the U.S. and here at home have sold off, pushing yields higher.

For a review of the portfolios’ performance, you can download our standard monthly portfolio report here. 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.

Turning to the portfolios, except for the Conservative Portfolio, which was slightly negative, each finished the month in positive territory.

The biggest gainer was the all equity Growth Portfolio which rose nearly 1.1%. Despite this rise, it lagged its benchmark, as the higher cash balance, and underweight exposure to Canadian equities was a headwind. The biggest detractor was the growth focused TD U.S. Blue Chip Equity Fund, which trailed the S&P 500 on weakness in many tech and healthcare names. Another detractor was the Mackenzie Ivy Foreign Equity Fund which lagged because of it’s high cash position, which makes up about a third of the fund.

The weakest absolute performer was our Conservative Portfolio, which was down by 0.02%, but handily outpaced its benchmark. This outperformance was the result of the defensive posturing of the Dynamic Advantage Bond Fund. The Fund has been positioned for this type of market environment with a significantly lower duration profile, which benefitted it during the month.

Going forward, equity valuations have become even more stretched, giving cause for concern. As we head into the new year, I expect there will be continued high levels of volatility in both equity and fixed income markets. I believe the portfolios are well positioned for a volatile market environment, as most of the funds are more defensively positioned, with higher than average cash balances. As volatility hits, expect managers to begin deploying the cash into high quality names trading at attractive valuations. I continue to monitor both the portfolios and underlying holdings closely.

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