Q3 2016 Commentary

Mackenzie Canadian Growth Team

Market Review

Most major global markets delivered positive returns with lower volatility compared to recent quarters. Although much of the performance was the result of a recovery from the short-lived Brexit sell-off at the end of the prior quarter, the global economy continues to grow, which we expect will result in rising corporate earnings over time. Typically, this is a supportive environment for equity markets.

In our view, although market valuations appear to be higher than long term historical averages, they remain within reasonable ranges, given the low level of inflation and interest rates globally. This, in combination with continued earnings growth for companies in general, suggests to us that equity markets remain reasonably attractive.

Outlook & Strategy

What are the key opportunities you see?

  • Over the past decade, global growth has been fairly anemic, and we do not anticipate any significant, durable improvement. We believe our investment style, based around owning 30-35 high-growth businesses at attractive valuations, is well suited to this environment. In nearly all economic environments, there are companies that perform well; we do not view current economic conditions as being an exception. During the quarter, we added positions in Metro-Richelieu, Potash Corp, Omnicom, and Nike.  

What are key risks that need to be managed?

  • Productivity growth has been below historical levels for an extended period of time (suggesting a less dynamic economic environment) but we are seeing the opposite in terms of the level of disruption of traditional, and often long-standing, business models. In particular, there has been significant turmoil in media and retail, with new internet-oriented businesses obtaining significant market share. The energy sector, still struggling to recover from a large supply shock created by the advent of U.S. Shale oil, appears to be at the forefront of experiencing a gradually building demand shock with the electrification of vehicle powertrains.
  • Generally, while disruptive change creates winners and losers, we tend to find it difficult to identify the ultimate winners and far simpler to avoid the likely losers.

How are you positioning portfolios in response to this outlook?

  • We continue to actively seek out high growth companies at attractive valuations to include in our portfolios. We are fairly cautious when analyzing businesses attempting to adapt to disruptive change, as such change is difficult to forecast and manage. As a result, we tend to own companies in more stable, less competitive areas.

Commissions, trailing commissions, management fees, and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns as of September 30, 2016 including changes in unit value reinvestment of all distributions and do and not take into account sales, redemption, distribution, or optional charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

Index performance does not include the impact of fees, commissions, and expenses that would be payable by investors in the investment products that seek to track an index.

To the extent the Fund uses any currency hedges, share performance is referenced to the applicable foreign country terms and such hedges will provide the Fund with returns approximating the returns an investor in a foreign country would earn in their local currency.

This document includes forward-looking information that is based on forecasts of future events as of September 30, 2016. We will not necessarily update the information to reflect changes after that date. Risks and uncertainties often cause actual results to differ materially from forward-looking information or expectations. Some of these risks are changes to or volatility in the economy, politics, securities markets, interest rates, currency exchange rates, business competition, capital markets, technology, laws, or when catastrophic events occur. Do not place undue reliance on forward-looking information. In addition, any statement about companies is not an endorsement or recommendation to buy or sell any security.

The content of this commentary (including facts, views, opinions, recommendations, descriptions of or references to, products or securities) is not to be used or construed as investment advice, as an offer to sell or the solicitation of an offer to buy, or an endorsement, recommendation or sponsorship of any entity or security cited. Although we endeavour to ensure its accuracy and completeness, we assume no responsibility for any reliance upon it.

On November 10, 2006, the Mackenzie US Growth Class acquired the assets of another Mackenzie-sponsored fund in a merger that was considered a material change for the Fund. Therefore, the Fund’s performance is provided from the date of the merger rather than its inception, as required under applicable securities laws.