Mackenzie Minute: May 12, 2017
Matt Moody, Portfolio Manager on the Mackenzie Ivy Team, discusses the recent lack of market volatility and developments in the consumer goods industry.
MATT MOODY: One of the more interesting events recently is actually a non-event and that is the absence of volatility. Market volatility has been very, very low this year and the expected volatility for the future is also very low. The VIX Index of implied volatility, the so called fear gauge, recently hit a 23-year low. Any time anything hits a multi-decade high or low, it is interesting to think what that might mean and, combined with what we consider to be high stock prices, it is a little bit concerning.
Investors and media often tend to be focused on things like political events like the recent French elections or pronouncements from central banks around the world or economic releases, that sort of thing. Those things are important, but we don’t think that we have an ability really to predict the outcomes of those things or what impacts they may have, so we spend all of our time, worrying about and thinking about individual companies and what is happening from a bottom-up point of view to the companies we invest in and that we would like to invest in.
One event that has had an impact is the recent bid by Kraft-Heinz for Unilever that happened a couple of months ago. The bid was dropped, but ultimately it did shine a light on developments in the consumer goods industry and this is a space where we traditionally have had significant exposure in the Fund. What has happened in recent years is that market growth has slowed and companies have responded to this phenomenon in different ways, some of them cutting costs aggressively, others attempting to grow through further innovation, investments in marketing and that sort of thing. The divergence of strategies is quite interesting to us and the way that companies are responding does have implications for us what we consider to be a high quality business in this space.