On balance, July offered up a solid start to the third quarter. Despite the increasing global trade war, economic growth numbers to pointed to continued expansion. Corporate earnings, particularly in the U.S. were strong, thanks largely to the tax cuts introduced by President Trump back in December. Investors also took some solace in indications the U.S. may be willing to pull back a bit on the trade front, after the U.S. and Europe agreed to a cease fire on tariffs while a new trade deal is negotiated. There were also signs that the U.S. may be willing to reopen NAFTA negotiations.
While there was some give from the U.S, they continued to play hardball with China, as another round of tariffs are set to kick in in August. China has implemented another round of retaliatory tariffs. While the trade situation may appear as dire as it was a few months ago, it is far from being resolved.
In this environment, equity markets were largely higher, with U.S. stocks leading the way as the S&P 500 rose by 3.7% in the month. European equities were also higher, rallying up 3.2%. Closer to home, the S&P/TSX Composite Index gained 1.2% with financials and industrials leading the way.
The U.S. dollar lost some ground, ending the month at $1.3017, down from $1.3168 in June.
Turning to bonds, upward pressure on yield pushed prices lower. The FTSE/TMX Canada Universe Bond Index lost 0.2%. Corporate bonds outpaced government bonds, as a lighter new issue calendar helped bring dealer inventories down and move the supply demand closer to equilibrium.
The portfolios were all higher. Our most defensive Conservative Portfolio rose by 0.4%, which outpaced its benchmark thanks to a strong outperformance from the RBC Global Corporate Bond Fund, and the Sentry Select Small Mid Cap Income Fund.
Our Balanced Portfolio rose by 0.5% but trailed the benchmark. The defensively positioned Fidelity Canadian Large Cap and the very growthy TD U.S. Blue Chip both significantly trailed their benchmarks, muting the relative performance of the portfolio.
For our most aggressive all equity Growth Portfolio, it was a similar story, posting a very respectable 1.1% gain, but failed to keep pace with its benchmark. Again, it was the Fidelity and TD offerings that were responsible for most of the underperformance.
For a more thorough review of the portfolios’ performance and risk reward metrics, you can download our standard monthly portfolio report here. Additional detail can be found in these reports generated by Morningstar. A summary report can be downloaded here, while the more detailed report can be downloaded here.
As we head into August, I don’t expect much activity and am expecting largely rangebound markets. Many are on vacation and volumes tend to lighter than normal. That said, given all that’s on the horizon, I expect it to be a very eventful fall. Our portfolios remain very well positioned for a volatile market environment.