June 30, 2023 | portfolio managers' brief

Portfolio Managers’ Brief: June 2023

BY: Jason Ayres
A brief review of market conditions and how they are impacting the management decisions of our Investment Review Committee (IRC).



U.S. Equities:

  • Positive momentum in June after the resolution of the debt ceiling crisis.
  • S&P up 12% YTD; NDX up 35%. Both surpassed technical resistance levels.

Tech Companies’ Dominance:

  • A select group of tech leaders is significantly driving U.S. stock market returns. These tech leaders contributed 53% to the S&P performance.
  • Rally is starting to broaden which is needed to sustain the uptrend.

Canadian Market:

  • The TSX is underperforming compared to U.S. indices; up by just under 1% for the year. The lag is attributed to the performance of material, energy, and financial stocks.

Fixed Income:

  • XBB – iShares Core Canadian Universe Bond Index ETF is down by 0.36% YTD.
  • Bond market pressure is caused by rate hike uncertainties and inflation concerns.

Rate Hikes:

  • Bank of Canada raised the lending rate to 4.75%, a 25 basis points increase.
  • U.S. Federal Reserve kept rates steady, now at 5.00%.

Future Rate Projections:

  • U.S. and Canadian authorities suggest readiness to raise rates to hit the 2% inflation target.
  • Economic indicators like employment and GDP remain strong, signaling potential future hikes in an effort to cool the economy.

Investment Portfolio Overview:

  • Significant growth in U.S. stock market indices primarily due to tech giants.
  • Canadian market barely positive; fixed income largely negative. Result: modest returns for diversified portfolios.

Implementation of Strategies for Uncertain Markets:

  • Emphasis on capital preservation and risk-adjusted returns.
  • Approaches to achieve this:
    • Favoring Canadian non-corporate bonds for stable yields.
    • Using money market funds for attractive yields with low risks.
    • Pivoting to funds with better risk-to-return metrics using 2022 and 2023 data.
    • Utilizing correlation and standard deviation analysis to select stocks and funds that complement each other.
    • Leveraging various option strategies in some portfolio models to enhance cash flow.

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