Natixis Canada Blog

Month: October 2015


NexGen U.S. Growth Fund: US Equity Markets Hurt by Chinese Market Volatility in 3Q

Dennis Ruhl, CFA J.P. Morgan Asset Management

U.S. equity markets as measured by the S&P 500 Index suffered their worst quarterly loss since the third quarter of 2011 as Chinese equity market volatility spread throughout the globe. China first made headlines with a surprise move by the People’s Bank of China (PBoC) to devalue the Chinese renminbi relative to the U.S. dollar. Investors were also discouraged by inaction of the Federal Reserve (Fed) at its September meeting, which created more uncertainty about the interest rate outlook. Large-cap stocks as represented by the S&P 500 Index fell 6.4%*, but outperformed small-cap stocks measured by the Russell 2000 Index, which lost 11.9%*. The S&P 500 Index finished the first nine months of 2015 with a loss of 5.3%*, outpacing the Russell 2000 Index, which was down 7.7%*.

 *in USD

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Q3 Adds More Bricks to the “Wall of Worry”

 

Jeff Young Photo
Jeff Young, MBA, CFA Co-CEO, CIO NexGen Financial LP

MARKET & FUND PERFORMANCE REVIEW
The third quarter of 2015 saw a continuation of the equity market downturn that began in June. Equity income securities and preferred shares, which have been particularly hard hit this year, continued their sell-off. Bonds reversed course somewhat from the second quarter and posted modest gains.

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Q3 2015 Update – Hunting for Value Amidst Volatility

Keith Graham Rondeau Capital
Keith Graham
Rondeau Capital

The third quarter of 2015 was certainly not a fun one in the financial markets as losses were experienced around the globe. The S&P/TSX Total Return Index was down 7.9% in the quarter. Major global markets such as the S&P 500 Index (-6.4%*), MSCI World Index (-8.9%*), and Japan’s Nikkei 225 Index (-12.2%*) were also down sharply (*US$ returns quoted). Much of this market turmoil was driven by the extreme volatility in the Chinese financial markets, which are being affected by an economic slowdown combined with an earlier speculative burst that had taken the stock market to bubble like levels.

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The Fed Leaves Rates Unchanged and Markets Take Risk-Off Attitude

Jeff Herold
Jeff Herold, J. Zechner Associates, Lead Fixed Income Manager

“Much Ado About Nothing” is the title of a comedy by William Shakespeare, but also describes the markets’ reaction to the U.S. Federal Reserve decision to leave interest rates unchanged. In the days leading up to the Fed’s September 17th announcement, observers were evenly divided about whether there would be a rate increase or not. After the announcement and a subsequent dovish press conference by Fed Chair Janet Yellen, equity, commodity, and bond markets adopted a risk-off attitude that anticipated significantly weaker economic activity in the future. It seemed that investors reacted to the Fed’s inaction by wondering “What do they know that we don’t know?” Global equity markets fell 7% to 8% in the days following the Fed meeting and the prices of copper, aluminum, and oil dropped similar amounts. In the Canadian bond market, the yield spreads of provincial and corporate bonds moved wider as economic expectations were lowered. Yields of federal bonds, in Canada and the United States, declined due to a flight-to-safety bid. The FTSE TMX Canada Bond Universe returned -0.27% in the month.

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Preferred Shares in September: Oversold and Offering Tremendous Value?

Jeff Herold
Jeff Herold, J. Zechner Associates, Lead Fixed Income Manager

Preferred shares continued to fall in value in September. In large part, the indiscriminate selling by retail investors that dominated the summer months continued. However, the drop in prices was exacerbated by a structural change in two new rate reset issues that made all existing rate reset issues look less attractive. The S&P/TSX Preferred Share index returned -5.56% in the month. Rate reset issues were the weakest sector in the market, as the S&P/TSX Laddered Preferred Index declined 6.59%. In contrast, perpetual issues returned -1.67%.

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