Asset Allocation – August 2017
The S&P 500 is up 11.9% so far in 2017 after advancing .3% in August, the tenth consecutive month the index has registered a positive return. Emerging markets equities remain the best performing asset class YTD up 28.6%. The technology sector is the top performer in the S&P 500 up an impressive 26.6% while energy and telecom are the only two sectors in the red down -15.1% and -7.9% respectively. Of note, the Small Cap energy index is now off 42% in 2017. and HY Spreads in the energy sector are beginning to widen once again (stay tuned). Consumer Discretionary is leading in Canada up 11.2% while energy is the worst down -14.2%. Long Duration US Treasuries beat all other asset classes in August returning 3.6% on heightened geopolitical tensions and concerns surrounding the current administration (to put it mildly). Below, the Ratio of the S&P 500 to US Long Bond Price sits near levels last seen in 1999.
STOCK / BOND RATIO
Defensive portfolio factor positioning returned in August. YTD defensive sectors are outperforming more cyclical sectors, large cap is beating small cap, growth over value and low volatility over high beta. We believe, these trends will continue to persist through year end. Momentum continues to be the factor to watch up 24% YTD thanks to its large allocation to US Technology (>40%).
US Factor Performance YTD
While the Commodities continue to lag and are the only asset class in the red down -2.7%, this is the result of energy and agriculture weighing on otherwise large moves in industrial (+21%) and precious metals (+13%). Specifically, Copper is up 22%, Gold 15% and Platinum up 38% YTD. The move in industrial metals confirms the advance seen in emerging market equities this year.
Commodity Performance YTD
The Canadian dollar is up 7.6% YTD as the US Dollar index remains one of the worst performing currencies in 2017, down 9.3%, The Euro has surged over 13% and Bitcoin continues to be Bitcoin, up nearly 400% this year.
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