Mackenzie Minute: February 9, 2018
Alain Bergeron, Senior Vice-President, Mackenzie Asset Allocation Team says despite recent market volatility, fundamentals are intact because the correction was driven mainly by technical factors rather than fundamental.
ALAIN BERGERON : In the last few days, what we’ve seen in the market is an increase and elevated level of volatility. We can see that only by looking, for example, at the level of the VIX, which is an index that measures the implied volatility in the options in the S&P 500. That index reached levels that were last seen during the world financial crisis or during the bout of volatility coming from the European crisis.
Over the next few days and weeks, what we will be focusing on is on our indicators and our models of market sentiment. It is our view, as of the recording of this, that the correction and increase in volatility that we have seen is driven mainly by technical factors rather than fundamental. And so we think at this point that the fundamental picture remains relatively intact, but these models will be what we want to focus on and watch that would make us alter the view that we have now.
When we have a difficult market like we’ve had earlier this week, this really has a different impact on different funds. For our funds that are more defensively-oriented, like Monthly Income, a difficult market leads to outperformance, and it leads to evidence that the mechanisms that we’ve put in place are working. For the performance-oriented portfolios, we currently have an overweight equity. Now to put that in context, we have put that overweight stocks in the middle of 2016. Since then, including this week, the cumulative return of the S&P has been 27 percent. That has been positive for our investors.