MD Financial Management: Chief Investment Officer Market Update—Staying the Course Amid Oil Price Volatility

December 10, 2014

The price of oil has declined significantly in recent days. While the headlines focus on dramatic and recent changes, history shows us that oil prices vary significantly over time. Although the recent peak in price was $US126 per barrel in March 2012, just over six years ago we saw prices even lower than those we see today. We would expect ongoing volatility for global oil prices. At the time of publication, the price was quoted at $US65 per barrel1.

We advise MD clients to maintain their global portfolio strategy despite this volatility. Our investment methodology incorporates an expectation that markets and factors will be volatile. In managing your investment portfolios we employ a high level of expertise to address our decision-making amid such turbulence.

For instance, we have some funds with more strategic allocations to energy. Our Canadian funds typically have a higher allocation to energy as this sector remains a large part of our economy. While some of our funds emphasize Canada’s strength in energy, we balance this with positions in other funds that have less emphasis on energy. This allows us to achieve our desired energy exposure for a total portfolio and is a key benefit of a diversified portfolio approach to investment.

In addition to our strategic positioning, our funds are actively managed to adjust to changes to factors, like oil price, or to take advantage of the benefit that a change in factors may have for certain companies. As a result, MD’s advice is to avoid making any adjustments to your portfolio as we have already positioned you to receive our best thinking.

All investment decisions in MD’s funds are constantly reviewed to assess the evolving drivers of corporate profitability and company valuations. A significant change in oil prices is an important factor in the analysis of many businesses, both energy companies and users of energy. This is particularly relevant for the Canadian economy and investment markets given our heavy reliance on the energy sector in general. With this in mind, we will continue to look to enhance our strategies over time as we seek to manage risks and take advantage of new opportunities.

If you would like to learn more about MD’s disciplined investment methodology and the impact of global economic trends on your investment portfolio, I encourage you to reach out directly to your MD Advisor.

William R. Horton, Jr., CFA
Chief Investment Officer
MD Financial Management Inc.

1 Brent Crude benchmark price, a global benchmark for crude oil trading

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