PIM: SRI Core Income & Growth Portfolio

Paul Borisoff - Nov 06, 2018

PIM: SRI Core Income and Growth Portfolio – November 5th, 2018


The SRI Core Income and Growth Portfolio* was down 4.9% in October - leaving the portfolio down 1.8% in 2018 – and down 0.9% over the last year. In comparison our benchmark was down 4.8% in September – leaving it down 0.4% in 2018 – and up 0.6% over the last year.


* These returns are reported as a composite, time-weighted, rate-of-return (gross of fees, net of transaction charges) for all accounts in this mandate. Long-Term Returns/Benchmark Numbers will be reported in our Quarterly Updates.


There was virtually no place for investors to hide in the October market massacre. The U.S. stock market (S&P500 Index) dropped 6.9% in the month led by the sell-off of previous market leaders (Amazon, Facebook, Netflix, etc.) which left NASDAQ down 9.2%. International stocks (EAFE Index) were down 8.0%, and the Canadian stock market (S&P/TSX Composite Index) was down 6.5% in October – with all broad sectors lower. The MSCI World Net (USD) Index (50% of our benchmark) was down 5.7% in October – and is now up 2.4% in 2018. Over the last twelve months this index is up 3.1% (after adjusting for the Canadian dollar impact in all cases – which increased these returns).


Note, high-dividends stocks, which have already been under pressure for the last year in Canada, were not left unscathed in October. The S&P/TSX Composite High Dividend Total Return Index was knocked 4.9% lower– leaving it now down 6.9% in 2018 – and down 5.7% over the last twelve months.

not hit as hard as stocks in October, the Canadian bond market (FTSE/TMX Canada Universe Bond Index) also dropped in the month – and was down 0.6%. In 2018 the Canadian Bond Market is now down 1.0% - and in the last twelve months it is down 0.6%.


For a broader perspective on how difficult general market conditions have been JP Morgan’s Head of Cross-Asset Fundamental Strategy recently observed that only on two prior occasions – the 1970’s and the global financial crisis – have so many asset classes had negative returns in a one-year period (reported in Zerohedge on October 27th). Cited as possible explanations for this broad weakness is concern that the global economy and U.S. earnings may have reached peak levels earlier this year and that the Fed is committing its habitual policy of over tightening – with fear that they will send the economy into a recession. Uncertainty around market implications of the U.S. mid-term election on November 6th is also a concern to investors – as is concern that China’s growth is rate slowing – and related concerns over Trump’s ongoing trade battle with the country. Note, JP Morgan’s strategist cited above believes that the market is over reacting though, and that the next possible recession will not be until 2020 – not dissimilar to what Canaccord Genuity’s market strategist Tony Dwyer has been espousing.


Market strategist David Rosenberg, Chief Economist and Strategist at Gluskin Sheff & Associates, was critical of the Bank of Canada’s ‘hawkish’ tone after their last rate hike in October “If there are typos in this missive, it’s because I am still shaking my head” – and makes the case that the Canadian economy is not strong enough to warrant multiple additional rate hikes in the foreseeable future – Globe and Mail, October 24th (attached). In a similar vein market commentator Martin Pelletier’s article “Bank of Canada’s rosy outlook doesn't add up” on October 30th (Financial Post - attached) makes similar arguments and points out opportunities that have developed in Canadian dividend paying companies – many which sold-off 15-30% from their 52-week highs recently.


The Canadian dollar moved lower in October - to $0.7600 CAD/USD from $0.7747 at the end of September – boosting our non-Canadian holdings in the month – and mitigating declines on our international positions. Year-to-date the Canadian dollar is down from $0.7948 at year-end 2017. A year ago, the cross was at $0.7759 CAD/USD.


Asset Allocation – October 31st, 2018:

5.0% Cash, 18.6% Fixed Income, 28.3% Canadian Equity, 48.1% Global Equity.


Recent Updates:

We did not make any changes to the portfolio in October.


Please do not hesitate to contact me if you have any question or concerns.



Paul J. Borisoff

Senior Vice President
Portfolio Manager
Senior Investment Advisor