Increased global equities, reduced cash
Volatility affords opportunity.
Equity market volatility came back with a vengeance over the past month, following a year-long stretch of historically low volatility. Simmering concerns over higher interest rates boiled over early in February following the release of strong U.S. wage growth data. In a span of five trading days the S&P 500 index experienced single day losses of 2.1%, 3.8%, and 4.1%. Prior to this, the last time the index lost more than 2% in a day was Sept 9, 2016. An attempt to recover these losses played out over the remainder of the month, but the last two trading days in February and the initial trading day in March all led to daily losses of more than 1%. For the month of February, the S&P 500 experienced its first negative total return (down 3.7%) in sixteen months.
International equities were not immune to the volatility and fared even worse. The MSCI EAFE Index declined 4.5% in February. Canadian equities fared relatively well, declining 3%, despite the Energy sector dragging on the market due to continued depressed prices for Canadian oil.
(Data sources: Bloomberg, TD Securities)
The Emblem portfolios capitalized on this opportunity at hand and deployed cash that had been accumulating over the RRSP season into US and international equities. The charts on the following page illustrate the resulting asset mix on March 1, 2018, and the change in asset mix from February 26, 2018.
Empire Life Investments Inc. is the Portfolio Manager of the Empire Life Segregated Funds, the Manager of the Empire Life Emblem Portfolios and Empire Life Mutual Funds. Empire Life Emblem GIF Portfolios currently invest primarily in units of Empire Life Mutual Funds. Empire Life Investments Inc. is a wholly-owned subsidiary of The Empire Life Insurance Company.
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