Natixis Canada Blog

Month: January 2017


Trump’s Pro-Growth Agenda Pushes U.S. Equities Higher

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

The close of 2016 found the U.S. economy in relatively good shape, driven by healthy consumer spending and a backdrop of improving business sentiment. Consumer households are in good shape, with relatively strong balance sheets and increasing income supported by a healthy job market. U.S. Economic growth registered a surprisingly strong 3.2% rate of growth in the third quarter and that momentum appears to have carried through to the fourth quarter.

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Canadian and U.S. Equity Markets March Higher in Q4 2016

Kyle D’Silva, MBA, CFA, Manager of NexGen Canadian Dividend Funds & NexGen Canadian Diversified Income Funds

MARKET REVIEW

In Q4 2016, Canadian and U.S. equity markets marched higher, while fixed income markets posted negative returns for the first time during the year (Exhibit 1). From our vantage point, the primary drivers behind this divergence in asset class returns was the election of Donald Trump on November 8th, the swift rise in the U.S. dollar and the steepening of North American government bond yield curves.

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Drivers of “Trump” Rally Remain Intact

Dennis Ruhl, Portfolio Manager, NexGen U.S. Growth Funds

U.S. equity markets continued to advance in December as the S&P 500 Index made its 18th all-time closing high in 2016 of 2,271.72 on December 13. The drivers of the “Trump” rally remain intact as investors continue to anticipate corporate tax reform and less regulatory pressures from Washington. December also marked the first increase in interest rates by the Federal Reserve (Fed) since December of last year. As 2016 drew to a close, equity markets drifted lower as the post-election enthusiasm started to fade along with the lack of news flow heading into the New Year. Small-cap stocks continued to outperform large caps. Small caps as measured by the Russell 2000 Index rose 2.8%*, outpacing large caps as represented by the S&P 500 Index, which advanced 2.0%*.

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Divergence Between Stock and Bonds in Q4 2016 Highlights the Importance of a Balanced Strategy

Ron Patton, Portfolio Manager, Natixis Strategic Balanced Fund

Market Review & Outlook

The fourth quarter’s most distinctive attribute was the divergence between stock and bond performance, highlighting the importance of investing in a balanced strategy. The FTSE TMX Canada Universe Bond Index turned in its worst quarterly performance since March 1994. Yields increased ~45 basis points resulting in a -3.4% return. Stocks, represented by the MSCI World Index and the S&P/TSX Composite Index, moved higher. Canadian equities were the best performing asset class (up 4.5%), followed by global equities (up 3.9% in Canadian dollars), then bonds. As a result, our overweight position in global equities relative to Canadian equities was a slightly negative factor, while our underweight in bonds and our exposure to preferred shares was a positive factor.

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Canadian Preferred Share Market Moves Sharply Higher In December

Jeff Herold
Jeff Herold, Portfolio Manager, NexGen Canadian Preferred Share Fund

The Canadian preferred share market moved sharply higher in December as large scale buying of preferred share Exchange Traded Funds (ETFs) pushed the prices of individual issues upward. A lack of new issues contributed to the market’s strength. As well, in contrast with recent years, there was relatively little tax-loss selling in December. Rate reset issues performed particularly well as a result of direct investor interest and also due to hedging of structured products. The S&P/TSX Preferred Share Index returned +3.59% in the month.

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