OUR APRIL RESULTS
Our weighted average return in April was +0.50%. Since 2015, we have generated a net return of +33.71%.
In terms of investment strategy performance, our weighted average net returns for April were (a) -0.41% for conservative strategies, (b) +0.40% for balanced strategies, and (c) +1.31% for aggressive strategies.
April was yet another volatile month with corporate earnings and geopolitical drama sending markets back and forth. Corporate earnings came in stronger than expected and gave a strong indication that the US economy continues to perform well. In the commodity space, Trump’s decision to back out of the Iran nuclear deal helped push oil prices up 7%. As mentioned is last month’s commentary, there was also significant volatility in the metals sector as the US applied sanctions to a number of Russian industrial titans. By the end of the month, the S&P 500 was +0.4%, the US dollar gained +1.8% versus the Euro and the Barclays Global Aggregate Bond Index was -1.6%.
We have often remarked on the inverse relationship between rising rates on bond prices. We have also stressed the importance of having equity exposure in conservative investment mandates to counterbalance the effect of falling bond prices. Balance and flexibility are extremely important for investment portfolios that want to preserve capital and achieve long-term growth. We understand how frustrating it can be for conservative strategies to lose money on a monthly basis – especially for numerous months in a row. However, what is beautiful about bonds is that every day they are earning you interest. With patience, these daily accruals get bigger and bigger regardless of day-to-day price action on the underlying bond. Higher yields also create attractive entry points for new buyers.
Returning to equities, we often hear existing and potential clients say that equities are expensive and that surely a crash is coming. History has shown that anything is possible. However, stock prices are a function of current and future earnings. As my colleague Kaspars pointed out the other day, strong earnings from the US corporate sector coupled with modest equity returns have actually made the S&P 500 cheaper. At the end of 2017, according to earnings expectations, the S&P 500 valuation on a forward basis was 20 times earnings. After an excellent earnings season, the forward P/E for the S&P 500 is now 17.7. This is by no means cheap, but it serves us well to remember that goods of true quality and utility rarely go on sale.
On behalf of our Client Portfolio Management team, I thank you for your continued trust and support!
FULL DISCLOSURE: Please note that the opinions expressed in this blog should in no way be considered as investment advice or a solicitation to buy or sell securities.