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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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Positive Investor Sentiment Sent U.S. Equity Indexes to All-Time Highs in Q1 2017

Oakmark Natixis Portfolio Managers
William Nygren; Kevin Grant; Michael Mangan, Harris Associates, Co-Managers, Oakmark Natixis Funds

Investor sentiment was notably positive coming into 2017 and U.S. markets built on this momentum in the first quarter, pushing key indexes to reach all-time highs during the period. However, the rally halted late in March after the new administration failed to repeal the Affordable Care Act. The Dow Jones Industrial Average fell for eight consecutive sessions, stemming from investors’ skepticism about the Republican Party’s ability to get other initiatives passed quickly through the legislature. Even so, benchmarks ended in positive territory for the past three months.

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U.S. High Yields Continue to Rally in Q1 2017 With Spreads Hitting Multi-Year Highs

Dan Fuss; Matt Eagan; Elaine Stokes; Brian Kennedy; Co-Managers, Loomis Sayles Strategic Monthly Income Fund

A synchronized pickup in global economic activity supported risk appetite during the quarter. Most asset classes generated positive returns, led by high yield credit, equities, and unhedged emerging market bonds. The Federal Reserve (Fed) raised rates in March, a widely anticipated move that acknowledged the strengthening U.S. economy. Corporate profits improved and volatility remained very low. Commodity performance was mixed; metals rallied while oil prices dropped.

The U.S. high yield credit rally that began in 2016 continued into the first quarter, with spreads (the difference in yield between Treasury and non-Treasury securities of similar duration) reaching multi-year tights in early March. Though spreads widened somewhat during the last weeks of the quarter, the asset class handily outperformed Treasurys of similar duration (duration refers to a security’s price sensitivity to interest rate changes).

U.S. Treasury yields reached year-to-date highs ahead of the Federal Reserve (Fed) interest rate hike, then retreated to finish the quarter essentially flat. The yield curve (a curve that shows the relationship between bond yields across the maturity spectrum) flattened as shorter-maturity Treasury yields rose while longer-maturity Treasury yields were nearly unchanged.

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