Mackenzie Minute: April 6, 2018
Portfolio Manager Phil Taller explains how the Mackenzie Growth Team is positioning against the risk of a US economic slowdown.
PHIL TALLER: So, 2017 was a year of great enthusiasm for US equities, and that was combined with a really low level of volatility, so almost a perfect environment. The year 2018 began in a similar way but in the last couple of months things have changed. There's been a much higher level of volatility and, in particular, we are noticing, more recently, that some equities that have done really well, some high-priced momentum equities, have started to become challenged on the price front. They've been dropping.
We've been watching bond yields go up since the summer of 2016, so it's been a while now. There's also the concern about trade wars. But even if those don't happen, there is a possible concern that we've had for a while that once bond yields start going up, which indicates tightening in the pipeline, that eventually the economy starts to slow. So, we're keeping an eye on leading indicators, on what our companies are reporting and very definitely on valuations, as always.
So, in the Mackenzie US Mid Cap Growth Class, which my team manages, what we've been doing for the last almost two years is, quarter by quarter, lowering the cyclical exposure of the Fund, lowering the beta of the Fund, definitely keeping an eye on valuations and trimming back things that have become high-priced, because we felt that even though we can't make economic projections, we do know that the risk of a slowdown exists, eventually you are in a late cycle, and we wanted to be prepared for that problem, if it occurred.