Mulvihill x Wealthsimple – May Commentary
How are we positioned?
Global stock market returns varied in May, Canada and the US advanced 3.1% and 2.4% respectively, while International Developed (EAFE) and Emerging Markets declined -2.2% and -3.5% respectively. Our portfolios remain heavily tilted towards US stocks with no exposure to Canada or Emerging Markets at this time.
Fixed Income returns were negative across the four regions, with Canadian bonds performing best in the month returning -.05% while emerging bonds dropped -3.2%. Our allocation to fixed income remains as low as possible in each portfolio as interest rates continue to rise from depressed levels globally.
The three portfolios (Growth, Moderate and Conservative) recorded positive performance in May. The largest contribution to returns was US Small Caps (IJR), returning 6.5% in the month. The allocation to international bonds was the largest drag (IGOV) as rates in Europe spiked and the Euro declined on headlines out of Italy. We remain invested in Gold (CGL) which declined 1.3% in the month as the US Dollar advanced.
The Growth fund added a small 5% weight to the XRB ETF providing inflation-protected Canadian fixed income exposure. The ETF was up 2.1% in May,
The Moderate Fund added the VBG ETF. The fund provides International fixed income exposure but eliminates impact of currency. This switch was made to lower the Moderate funds exposure to potential currency volatility.
This document may contain certain forward-looking statements. These statements may relate to future events or future performance and reflect management’s current expectations. Such forward-looking statements reflect management’s current beliefs and are based on information currently available to management. Although the forward-looking statements are based upon what management believes to be reasonable assumptions, there can be no assurance that actual results will be consistent with these forward-looking statements. Neither the Funds nor their respective managers assume any obligation to update or revise any forward-looking statement to reflect new events or circumstances. Actual results may differ materially from any forward-looking statement. Historical results and trends should not be taken as indicative of future operations. The Fund is not guaranteed, its value changes frequently and past performance may not be repeated. Unless otherwise indicated and except for returns for period less than one year, the indicated rates of return are the historical annual compounded total returns including changes in security value. All performance data take into account distributions or dividends paid to unit holders but do not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that would have reduced returns.