CIO Bill Horton on BNN: MD Financial Management Maintains Contrarian View

March 20, 2015

MD Financial Management Inc. (MD) continues to position portfolios with an overweight holding in Canadian equities and an underweight position in U.S. stocks based on strong macroeconomic signals favouring Canada at this time. Client portfolios have been rebalanced to reflect these views.

Appearing on the Business News Network, Chief Investment Officer William R. Horton, Jr. said the decision, which is a contrarian view—or an investment style that goes against prevailing market trends—forms part of MD’s tactical asset allocation decision, announced on March 16, 2015. MD, which is owned by the Canadian Medical Association, relies on tactical decisions to take advantage of short-term market opportunities.

“We assess opportunities but within the context and constraints of a risk budget,” Mr. Horton stated. “And that’s why we decided—given the way the signals align—to focus on having an overweight position in Canadian stocks and an underweight position in U.S. stocks because of the future potential. This is contrarian because momentum points toward the U.S. as being the place to invest.”

Mr. Horton believes there is support for MD’s view given that, in comparison to the U.S. Federal Reserve, the Bank of Canada has greater potential to lower interest rates. (In technical terms, this amounts to increasing the difference between short-term and long-term bond yields—referred to as a steeper yield curve. The steepening of a yield curve typically signals potential for stronger economic growth).

With U.S. interest rates at close to 0%, it appears that the Fed has limited capacity to lower rates further, raising the likelihood that rates will rise in the medium term. In an announcement this week, Fed Chair Dr. Janet Yellen said the central bank is preparing to consider interest rate hikes "on a meeting by meeting basis."

In its other related tactical moves, MD has reduced its allocation to cash in order to deploy those funds towards increasing the position in equities, compared to fixed income. It remains underweight in equities overall but has narrowed the gap with this latest decision.

MD maintained its small underweight allocation to international equities and remains diversified, with holdings in all major asset classes and countries.

About MD Financial Management

MD Financial Management, with more than $40 billion in assets under administration, is a wholly owned subsidiary of the Canadian Medical Association. MD is dedicated to serving physicians and their families. MD Financial Management provides financial products and services, the MD Family of Funds and investment counselling services through the MD Group of Companies. For a detailed list of these companies, visit

Media Contacts

Maria Grant
Communications Manager, MD Financial Management
613 809-0657

Deborah Thompson
DT Communications
416 918-9551

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