Natixis Canada Blog

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U.S. Equities Advance in April on Better-Than-Expected Earnings

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

U.S. equity markets advanced modestly in April as better-than-expected corporate earnings were able to offset soft economic releases. Stock prices drifted lower in the first half of the month as expectations for the implementation of President Trump’s ambitious pro-growth agenda continues to fade and declining bond yields reignited investor concerns of tepid nominal growth. As the first-quarter earnings season progressed, U.S. equity markets were able to recover earlier losses as better-than-expected results from the industrial sector in particular caused investors to question whether demand trends are stronger than recent economic releases suggest. Small-cap stocks measured by the Russell 2000 Index slightly outperformed large-cap stocks as represented by the S&P 500 Index, as both indices rose 1.1%* and 1.0%*, respectively.

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High Yield Credit One of the Leading Asset Classes in Q1 2017

Kenneth M. Buntrock; Lynda Schweitzer; David W. Rolley; Scott M. Service; Co-Managers, Loomis Sayles Global Diversified Corporate Bond Funds

Rising economic confidence among businesses and individuals helped fuel positive market sentiment toward most global risk assets during the quarter. The Federal Reserve (Fed) raised rates in March, a widely anticipated move that acknowledged the strengthening U.S. economy. The Bank of Japan (BOJ), the Bank of England (BOE) and the European Central Bank (ECB) continued to expand their balance sheets, though the ECB will reduce its purchases to €60 billion per month in April. The euro zone avoided a political upset on March 15 when the Dutch elected incumbent Prime Minister Mark Rutte.        

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Equity Market’s Advance in Q1 Fueled by Strong Corporate Earnings, Positive Economic Data and Optimism About the Trump Administration

Paul Stewart; Michael Buckius; Kenneth Toft; Daniel Ashcraft; Co-Managers, Gateway Low Volatility U.S. Equity Fund

The S&P 500® Index gained 6.07%* (in Canadian dollar terms, the return for the quarter was 5.25%) for the first quarter of 2017. The equity market posted positive returns each month of the quarter with the S&P 500® Index returning 1.90%*, 3.97%* and 0.12%* for January, February and March, respectively. The equity market’s advance was steady over the first two months and reached a year-to-date closing high on March 1st. The S&P 500® Index declined 2.16%* from March 1st through March 27th before advancing at month-end. Realized volatility and implied volatility were persistently low throughout the quarter.

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Bonds Break Out of Their Trading Range, With Prices Moving Higher and Yields Declining in April

 

Jeff Herold
Jeff Herold, Portfolio Manager, NexGen Canadian Bond Funds

Following four months of sideways movement, bonds broke out of their trading range in April, with prices moving higher and yields declining. In large part, the catalyst for lower yields was the flagging optimism about the U.S. economy. The combination of weaker than expected economic data, the chaotic performance of the new Trump administration, and the inability of the U.S. Republican Party to agree on major policies such as the repeal of Obamacare, caused investors to lose confidence in the anticipated economic acceleration from the implementation of Trump’s election promises. Canadian bond yields lowered, following U.S. bond yields. The FTSE TMX Canada Universe Bond index returned 1.43% in April.

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Strengthening Economic Activity Sent Global Equity Indexes Higher in Q1 2017

 

David G. Herro & Michael Manelli, Harris Associates, Portfolio Managers of Oakmark International Natixis Funds

Global markets marched higher in the first quarter as economic activity continued to strengthen. The Dow Jones Industrial Average notched its sixth consecutive quarterly gain, and the STOXX Europe 600 Index advanced for the third quarter in a row. In February, the U.S. personal consumption expenditures (PCE) index surpassed the Federal Reserve’s long-term target. The Eurozone’s own annual rate of inflation also reached the European Central Bank’s 2% target in February for the first time in four years. Citing improvements to the labor market and economic health, the Federal Reserve once again lifted interest rates in the U.S.

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