Natixis Canada Blog

Month: September 2016


August 2016 One of the Least Volatile Months in Market History

Dennis Ruhl, CFA J.P. Morgan Asset Management, PM of NexGen US Growth Funds

The most common measure of market volatility is the CBOE Volatility Index®, otherwise known as the VIX. For August, the average level of the VIX was 12.38, levels not seen since the late spring-early summer of 2014. August also happens to be one of the slowest months for trading volume given that the end of summer is near. Trading for this August was extremely light as volumes were down 22.6% from of the same period last year. Given the lack of news flow, the major focus for investors was Federal Reserve (Fed) Chair Janet Yellen’s upcoming speech at the Fed’s annual symposium in Jackson Hole, Wyoming. Investors were hopeful for guidance about when the next Fed interest rate increase may be.

 

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Canadian Corporate Spreads Tighten

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Darren Ducharme & Harold Scheer, Baker Gilmore & Associates, Portfolio Managers of NexGen Corporate Bond Funds

Following the heightened volatility experienced earlier in the summer, market activity was fairly subdued in August; most assets traded in fairly tight ranges, as investors waited for policymakers to deliver further signals on potential changes to monetary and fiscal stimulus programs. Movements in global government bond markets were mixed; yields fell in the UK and Australia after central banks in both countries took steps to further stimulate their economies, while rates increased in most other markets on heightened speculation that the US Federal Reserve is moving closer to hiking rates again. Global investment grade and high yield credit spreads generally declined; in Canada, corporate spreads modestly tightened, while provincial spreads widened. Riskier assets performed well, with emerging market equities and energy prices leading the rally.

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Canadian Bond Market Subdued In August

 

Jeff Herold
Jeff Herold, J. Zechner Associates, PM of NexGen Canadian Bond Funds

Following a number of months that experienced headline driven volatility, the Canadian bond market was much more subdued in August. Bond prices and yields moved within narrow bands all month, although it felt like some of the flight-to-safety bid for bonds from previous months was unwinding. Investors’ attention was taken up mainly with relatively high levels of new provincial and corporate issuance. However, a number of times during August U.S. central bankers stirred up speculation of a September interest rate increase and those prompted bond market adjustments. The FTSE TMX Canada Universe Bond Index returned 0.09% in the month.

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Demand for Preferred Shares Continues in August

Jeff Herold
Jeff Herold, J. Zechner Associates, PM of NexGen Canadian Preferred Share Fund

The S&P/TSX Preferred Share Index earned 1.12% in August. Ongoing demand for the relatively high yield of preferred shares, combined with a shortage of new issues, pushed share prices higher and yields lower early in the month. The new issues that did come to market enjoyed robust investor interest, but pushed the prices of existing issues lower. Institutional participation in preferred shares continued to increase, with one of the new issues having a record number of institutional buyers.

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Markets Continue to Rise but Valuations Are Concerning

Donald Nesbitt & Mikhail Alkhazov, Ziegler Capital Management, Portfolio Managers of NexGen US Dividend Plus Funds

Large cap equity indices’ prices appeared to tread water during the month of August, as the S&P 500 Index’s 0.1%* return was driven by dividend yield. Smaller sized stocks fared better, as the mid-cap S&P 400 Index returned 0.5%* and the small-cap S&P 600 Index provided 1.4%* for the month. Value-oriented equity management approaches outperformed Growth-tilted strategies, as investors rewarded the stocks of companies exhibiting relatively attractive valuations. The Russell 1000 Value Index increased 0.8%* in August, led higher by the cyclically sensitive Financials (+3.9%)*, which rose on improved prospects for higher interest rates, and the Information Technology sector (+3.0%)*, whose stocks reported relatively good second quarter earnings results. The more defensive Utilities (-5.4%)*, Telecommunication Services (-5.5%)* and Real Estate (-3.3%)* sectors suffered losses over concerns of potential interest rate increases.

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