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Mulvihill x Wealthsimple – October Commentary

Performance & Market Commentary

Stocks

Stock markets around the globe experienced severe declines in October as rising interest rates, potential trade wars, and uncertainty around mid-term elections spooked investor confidence. US and Canadian stocks had their worst monthly decline since September 2011, declining -6.8% and -6.3% respectively in October. Emerging market stocks continued to underperform, falling 8.7% for the month and are now off over 15% in 2018. The Mulvihill portfolio mandates have zero exposure to emerging market equities. We continue to view US equities as providing a superior risk reward opportunities.

Fixed Income

Fixed income outperformed stocks in the month but continues to offer little in the way of portfolio protection for investors portfolios in a rising interest rate environment. International and Emerging Market bonds suffered the largest declines in the month down -1.9% and -1.4% respectively. Our allocation to fixed income remains as low as possible in each portfolio as interest rates rise from depressed levels globally.

Portfolios

The three portfolios (Growth, Moderate and Conservative) recorded negative performance in October. The best performing holding was Gold (CGL) up 1.7%. It was one of the few asset classes globally that had a positive return in the month.  US Small Cap (IJR) was the largest drag down -10.5%, giving back gains experienced in previous months. The US Dollar appreciated 1.93% vs Canadian dollar, adding to gains in the US holdings. The Growth and Moderate portfolio sold out of international bonds (IGOV) and Small Cap International Stocks (SCZ) at the beginning of the month. The Growth and Moderate portfolio added to US High Quality (ZUQ) and Emerging Markets Bonds (ZEF), while the Moderate portfolio also added US High Yield (XHY), and US Aggregate bond ETFs (VBU)

 

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.

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