As we move towards a new calendar year, we see our key economic and market themes continuing to unfold. One recurring theme is our view that the global economy will expand over the next few years, with emerging economies outpacing growth in the economies of the developed world. Another is that this trajectory, although positive, may be volatile—as growth remains heavily reliant on the actions of policy-makers globally.
One impact of this volatile growth trajectory is corresponding volatility in global markets through this period. We emphasize, however, that the strategic positioning of our portfolios takes into account that these types of market movements will occur. Our tactical positioning reflects an expected potential benefit, in the near term, of taking advantage of the dislocations inherent in volatile markets.
At the outset of the quarter, we re-engineered six of our MD funds and pools as part of our commitment to ensure that we are best positioned to meet the long-term investment objectives for MD funds, pools and portfolios. We made these changes after a rigorous evaluation process aimed at increasing expected returns without exposing client portfolios to additional risk.
During the quarter, equity markets showed positive momentum. The S&P/TSX Capped Composite Index realized its best return since the final quarter of 2010, with gains of 7%. Returns were also strong in the United States, with the S&P 500 Index up 6.4% in local terms. International equities rallied with the total return on the Morgan Stanley Capital International (MSCI) EAFE Index up 3.3% in Canadian dollar terms during the quarter, resulting in year-to-date returns of 6.9%. Other news saw commodities gain ground, with the Standard & Poor’s Goldman Sachs Commodity Index rising 11.5% in U.S. dollar terms.
Our active approach, reflected in our funds and pools, is a lynchpin of our commitment to deliver value to you. Looking forward, we believe we are well-positioned to deliver MD clients better downside protection as well as consistently competitive investment results, through a revitalized and compelling blend of managers.
You can also see and hear more about MD’s thinking about risk and opportunity in a recent interview I conducted on BNN, as well as in an interview in the Globe and Mail newspaper on the concept of "risk capacity".
We are always interested in your thoughts and questions. If you would like to discuss the structure of your portfolio, and the MD funds and pools that it contains, I encourage you to reach out to your MD advisor.
William R. Horton, Jr., CFA
Chief Investment Officer
MD Financial Management Inc.