After a strong start to the year in January and February, markets have leveled off in the last few months. For the first five months of 2015:

  • Short bonds in Canada returned 1.9%;
  • Other Income securities (REITs, Utilities and High Yield Bonds) returned 3.1%;
  • Canadian stocks rose by 3.8%;
  • US stocks returned 11.3% in Canadian dollar terms, with the majority of that appreciation coming from the rise in the US dollar;
  • International stocks gained 17.4% and Emerging market stocks returned 14.0% in Canadian dollar terms.

In light of these strong returns, we have been rebalancing portfolios in the last few months with a focus on the following:

  • We have taken profit on US stocks to bring all clients back down to their policy weight;
  • We remain over-weight in International equity and Emerging market stocks, which has benefited all portfolios;
  • We have mostly replenished bond allocations to make portfolios safer;
  • We have reduced exposure to Other Income to reduce sensitivity to interest rate fluctuations.

Portfolio returns to the end of May range from 4.5% to 8.5% depending on each client’s risk profile.

While the financial media speculates about the next stock market downturn, it is important to remember that stock markets are inherently unpredictable.  Rather than try to time the market, we focus on the elements we can control – managing your asset allocation and rebalancing to stay true to your plan.