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Market Update: Equity Markets Take a Breather

October 15, 2020

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Market Update: Equity Markets Take a Breather

COVID-19 & Your Finances News

For five months following March’s spectacular crash, global equity markets sprinted forward, undeterred by the global economic recession brought on by the Coronavirus pandemic. 

Finally in September, markets stepped back to take a breather.

Why the break?

If you’ve been following our regular market updates, you’ll know that we’ve been predicting that volatility could continue throughout the year. In September, we saw that come into play with the MSCI World, the S&P 500, and the TSX Composite Indices falling 3.4%, 3.8% and 2.1%, respectively. 

Here are the big issues driving Wall Street’s caution:

  1. Uncertainty around the US election outlook.
  2. The resurgence of new Coronavirus (COVID-19) cases worldwide.
  3. The ongoing anti-trust investigations by the US Department of Justice into some of the world’s largest tech stocks.

So what happens now?

American elections can move markets. Following the 2016 election, investors briefly held their breath sending markets on a sharp drop, but quickly regained their confidence and markets surged, climbing to new record highs in the years thereafter

Generally, these movements happen as investors respond to the potential implications of US elections around taxation, fiscal policy, international trade, and foreign policies. 

This time around, the pandemic presents an entire new set of geopolitical threats that could give investors pause:

On the other hand, companies have begun to report their third-quarter earnings, and investors expect to see signs that revenues and earnings may have bottomed and improved from a much broader pool of companies and sectors than just the FAANG (Facebook, Amazon, Apple, Netflix and Alphabet, formerly Google) technology stocks.   

Given these mixed outlooks, we expect investors will remain cautious with the markets potentially trading sideways (that is, not moving dramatically up or down) until the US election is determined. 

What’s new in our portfolios?

As of October 6, 2020, we have rebalanced our Private Aggressive Portfolio to better meet the model’s mandate. Based on historical analysis we expect this rebalance to provide higher returns with a risk level that’s fitting of the portfolio’s aggressive mandate for growth.

The new allocation consists of 70% Nicola Core Portfolio Fund and 30% Horizons S&P 500 Index ETF.  

Model Performance*

Here’s how market trends affected CI Direct Investing portfolios this month:

ETF Portfolios

September performance1-Year performance
ETF Safety Portfolio-0.26%+3.37%
ETF Conservative Portfolio-0.53%+4.73%
ETF Balanced Portfolio-0.82%+5.26%
ETF Growth Portfolio-0.94%+5.67%
ETF Aggressive Portfolio-1.11%+5.13%

The composition of each portfolio and further information can be accessed by clicking the portfolio name.

Private Investment Portfolios

September performance1-Year performance
Safety Private Portfolio+0.33%+4.59%
Balanced Private Portfolio+0.44%+5.02%
Aggressive Private Portfolio+0.82%+1.09%

The composition of each portfolio and further information can be accessed by clicking the portfolio name.


*This is a hypothetical illustration of our portfolio performance as of the date noted above. The time-weighted performance is displayed in Canadian dollars and assumes daily rebalancing (unless otherwise stated) and the reinvestment of distributions. Private Investment Portfolios assumes monthly rebalance. It is reflective of the model portfolio’s target holdings and weights including portfolio changes. The performance is net of the management expense ratios (MERs); however, does not include CI Direct Investing’s management fee or taxes. Performance is annualized for all periods greater than one year.  This performance may differ from clients’ actual account return due to the timing of deposits, withdrawals, buys and sells, and the reinvestment of distributions. 

The performance provided is for informational purposes only and is not to be considered as investment advice. Portfolio performance is not guaranteed. The value of your investment can go down, up and change frequently. Past performance is not indicative of future returns. There may be significant differences between the investment portfolios that are not discussed here, including different investment objectives and risk factors. You should always consider, in any investment decision, your investment objectives, needs, circumstances, restrictions, tolerance for risk, financial goals and investment time frame.

Although CI Direct Investing believes the obtained information provided from third-party sources to be reliable, CI Direct Investing does not guarantee the information and disclaims any liability associated with the use of these performance results. Source: Morningstar Direct. For full details of calculation please contact: [email protected].

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