Mackenzie Minute: May 6, 2016
In the first installment of Mackenzie Minute, Steve Locke, Senior Vice President of Investment Management and Lead of the Mackenzie Fixed Income Team, discusses recent market reactions to central bank policies, areas of interest for the coming weeks, and effects on the products he manages.
The significant events in the past few weeks are similar to the past few months. It's been dominated by central banks. In this case, though what they didn't do during April, Bank of Canada, FOMC, ECB Bank of Japan; they've all been status quo for the month. But, if we think back to earlier in the quarter, in Q1, there was actually changes in policy were quite significant, including the F1C decision not to pursue a more aggressive rate hike path through 2016.
Well, now markets have responded quite significantly since that Feb 11th low around that inflection point in Central Bank policies during the quarter. So, we've seen a huge response, for example, from the SP500, up about 12%. The U.S. high-yield market is up about 13%. And, we've seen even commodities, things like crude oil respond quite positively moving from about $26 a barrel to about $45 a barrel. So really as we look forward in the next couple of weeks, are those trends going to continue or are we going to hit another inflection point as we head through the second quarter?
We've been overweight in corporate credit. We added to our corporate credit exposure, both in the high-yield market, the low market and investment grade corporate debt during the late 4th Quarter and early 1st Quarter. So, we've had a really nice positive response in our total returns. As we look ahead though with the significant rebound that we've seen in those markets, we're looking at trimming some of those assets from our portfolio that have really had, you know, the most positive returns, that are really fully valued now. So, we're going to maybe de-emphasize that area a little bit while maintaining our overweight though.