Natixis Canada Blog

Preferred Shares Rally into Early April, But Finish the Month Slightly Lower

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

The Canadian preferred share market initially extended its rally into early April, but prices declined over the balance of the month to finish slightly lower than where they began. In part, the pullback later in the month could have been market fatigue as preferred share prices have risen almost continuously since mid-November. As well, some investors appeared to have been buying rate reset issues in anticipation that rising 5-year Canada bond yields would improve their dividend rates. However, when bond yields hit their lowest level of 2017 in April, that rationale lost support. The decline in bond yields reflected a risk-off shift in investor confidence which impacted preferred shares, as well as common equities. Also, index rebalancing later in the month saw more issues entering the index than being removed. In order to make room for the additions, indexed portfolio managers may have been forced to do more generalized selling of other issues, which led to further weakness in the market. In addition, the issuance of structured notes linked to preferred share ETFs declined, thereby reducing preferred share demand for hedging purposes. The S&P/TSX Preferred Share Total Return index had a flat return of 0% in the month.

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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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The Trump Effect Continues to Dominate Equities in Q1 2017

Joseph Sirdevan & Scott Connell – Galibier Capital Management Ltd.

Joe SirdevanSCOTT CONNELL

“Make Active Management Great Again”

-Galibier Capital

We were recently asked to speak at CFA Society Vancouver’s Annual Forecast Dinner. We chose to speak on “The Essence of Investing – Lessons from the Masters”. Our speech was really a summary of how Galibier’s process and philosophy is an amalgamation of what we view to be the best thinking of some the world’s great investors including Buffett, Graham, Lynch, Levy and Jarislowsky. It is the influence of these masters that has shaped The Galibier Way:

  • Focus on value, not price
  • Stay within your circle of competence
  • Manage Mr. Market
  • Volatility is your friend
  • Assess management carefully

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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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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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