Quarterly Insight Newsletter: Q2 2019 Part Two
Adaptive ETF Strategy Update
Within the equity segment of our Adaptive portfolios we utilize a Core/Satellite framework, whereby we allocate the majority of the portfolio to a Core component and the remainder to a Satellite component. The Core portion contains exposures to major market indexes for Canada, US and International equity markets whereas the Satellite has exposures to a select number of global markets segments that we have identified as having the ability to outperform the broad markets on a shorter-term basis.
At the start of the second quarter we allocated half of our Core portfolio to the US equity market, a third to international equities, and the remainder to Canadian equities. As the relative momentum across these markets shifted throughout the quarter, we lowered our International exposure and reallocated it to our Canadian exposure as the Canadian market has been much stronger so far this year.
The equity component of the Satellite portfolios within our Balanced accounts has held exclusively equity securities throughout the quarter, favouring equities over fixed income and commodities. Our Satellite portfolios have maintained strong exposure to the Information Technology sector both here in Canada as well as in the US throughout the quarter. Both of these sectors continue to exhibit very strong momentum and have significantly outperformed the broad equity market. The Utilities sectors in both Canada and the US have also exhibited strong momentum in the second quarter and as a result have been steady contributors to portfolio performance.
The Bottom Line
The slowdown in global economic activity has produced a reversal by some key central banks toward pausing or reducing interest rates. Despite this slowing growth, we continue to view the risk of a global recession this year as unlikely.
Trade tensions continue to experience periods of escalation without a lasting resolution. Trade actions continue to be the largest risk to the global economy and the threat of further battles will have the potential to unleash renewed volatility in financial markets.
We continue to expect that equity and fixed income markets will experience periods of volatility this year. This argues for some degree of caution, but will also add the potential for buying opportunities as the unfolding economic environment becomes clearer.
Disclaimer
Confidential and proprietary information. The contents hereof may not be reproduced or disseminated without the express written permission of Bellwether Investment Management Inc. (“Bellwether”). Bellwether is registered as: an investment fund manager in Ontario and Quebec; a portfolio manager in Manitoba and Saskatchewan; and as a portfolio manager and exempt market dealer in Ontario, British Columbia, Alberta, Quebec, New Brunswick, Nova Scotia and Prince Edward Island.
These materials do not purport to be exhaustive and although the particulars contained herein were obtained from sources Bellwether believes are reliable, Bellwether does not guarantee their accuracy or completeness. The contents hereof does not constitute an offer to sell or a solicitation of interest to purchase any securities or investment advisory services in any jurisdiction in which such offer or solicitation is not authorized.
Forward-Looking Information. The contents hereof may contain “forward-looking information” within the meaning of the Securities Act (Ontario) and equivalent legislation in other provinces and territories. Because such forward-looking information involves risks and uncertainties, actual performance results may differ materially from any expectations, projections or predictions made or implicated in such forward-looking information. Prospective investors are therefore cautioned not to place undue reliance on such forward-looking statements. In addition, in considering any prior performance information contained herein, prospective investors should bear in mind that past results are not necessarily indicative of future results, and there can be no assurance that results comparable to those discussed herein will be achieved. The contents hereof speaks as of the date hereof and neither Bellwether nor any affiliate or representative thereof assumes any obligation to provide subsequent revisions or updates to any historical or forward-looking information contained herein to reflect the occurrence of events and/or changes in circumstances after the date hereof.
General information regarding returns. Performance is expressed in CAD unless otherwise indicated, gross of applicable management fees. Indicated returns of one year or more are annualized. Past performance is not indicative of future performance.
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