The markets had another good quarter with very strong year-to-date returns for real estate and Canadian and US equities; however, there could be some dark clouds on the horizon, such as weak outlook for economic growth, progress (or lack thereof) of US-China trade talks, the potential for disappointing corporate earnings, just to name a few. While further drops in rates by central banks would be a positive for both bonds and equities, rate cuts that fall short of investors’ expectation or just do not materialize could quickly turn the tide. Overall weakness in the markets would not be a surprise in the coming months.
Canada – The TSX Composite was up 2.5% this quarter, with value and large cap contributing significantly to the gain; however, growth was up just modestly while small caps fell. Overall, Canadian equities are leading the way among global equities so far this year, up 19.1%.
United States – US equities continued with another positive quarter gaining 1.1% in USD and 2.4% in CAD. Large cap, value and growth all contributed to the gains, however, small cap’s negative return helped curtail the overall performance relative to Q2. While the Canadian dollar fell in Q3, it’s had a strong 2019 and has tempered US equity returns for Canadian investors to 16.4% year-to-date, relative to 20.0% in USD.
International & Emerging Markets – International and emerging markets equities put a real damper on the equity and real estate party this quarter – international was barely up 0.3% while emerging markets fell -2.8%.Value stocks fell while large cap was barely up. On a year-to-date basis, international is up a respectable 9.9%, however emerging markets is up a lackluster 3.0%.
Real Estate – Real estate was on a tear this quarter with Canada up 8.6% and international up 7.6%; that puts Canada up a very respectable 23.8% so far this year with international not far behind at 19.7%.
Fixed Income – Canadian bonds marched ahead by 1.2% this quarter and are up 7.8% year to date. Over the past quarter, we added a corporate bond fund, which now comprises up to 30% of the total fixed income allocation. The combined weighted-average volatility of the alternative fixed income funds and the corporate bond fund is approximately half of the FTSE Canada Universe Bond Index. This creates a strong foundation to dampen overall portfolio volatility during turbulent times in equity markets.
Gold – Gold is up again this quarter in both CAD and USD which makes the fourth consecutive up quarter. Gold made a recent bottomed at $1,196.20 USD on September 30, 2018 and is now up 23.1% to $1,472.90; however, it made a high of $1,566.40 on September 4th, a level not seen since April, 2013.