Market week: Investors wary, stock indexes mark time
Fund news from Vanguard, TD, BMO, RBC
Investors remained wary, as the major North American stock indexes edged down just below breakeven on the week, following the U.S. Federal Reserve Board’s policy update last Wednesday. The Fed said essentially that it thinks it will take until at least sometime after 2023 before maximum employment is achieved and the annual inflation rate reaches the desired 2% level and stays there for some time. It said it won’t hike its policy rate from its current near-zero level until then.
In addition, the so-called quadruple witching hour stimulated volatility in Friday’s session, keeping a lid on market performance for the week overall. The term refers to the simultaneous expiration of stock and stock index options and futures, which typically results in a flurry of trading. Adding to the general air of anxiety was the U.S. Commerce Department’s ban on transactions on social media companies WeChat (a subsidiary of Tencent) and TikTok (a subsidiary of Bytedance), both ultimately controlled by the Chinese government.
Both the S&P 500 Composite Index the Nasdaq Composite Index dropped 0.6% on the week, while Toronto’s S&P/TSX Composite Index closed the week just a hair below breakeven with a 0.1% loss, buoyed somewhat by the 9.6% jump in the price of crude oil. Gold remained flat at US$1,957 an ounce, gaining 0.4% on the week, as continued its uneasy trading range following a spike above $2,000 per ounce on Aug. 6.
Fund news and updates
* Vanguard launches retirement income ETF. Vanguard Investments Canada Inc. announced the listing of its new all-in-one and low-cost retirement income ETF, Vanguard Retirement Income ETF Portfolio (TSX: VRIF). It consists of eight existing underlying Vanguard index ETFs, four Vanguard equity ETFs, and four Vanguard fixed income ETFs
“As they retire, Canadians face a new set of financial challenges including keeping up with inflation, meeting their monthly spending needs and the risk of potentially outliving their assets,” said Kathy Bock, Managing Director and Head, Vanguard Investments Canada Inc. “This ETF can help manage some of those risks by providing a predictable stream of income, within a simple yet sophisticated “all-in-one” retirement solution that provides broad diversification and regular rebalancing, at a low cost.”
The new ETF seeks to provide a combination of consistent income with the possibility of some capital appreciation by investing in equity and fixed income securities, made up of the eight underlying Vanguard index ETFs.
“Following one of the sharpest market declines in recent memory earlier this year, Canadian investors and advisors are looking to effectively safeguard and manage their hard-earned assets to meet their retirement needs,” said Scott Johnston, head of product, Vanguard Canada. “For financial advisors, this provides a scalable and transparent solution for clients as a complement to their retirement strategy. For investors, this is a one-stop globally diversified and turnkey option that provides capital appreciation and monthly tax-efficient income.”
* TD debuts responsible investing funds. TD Asset Management Inc. on Sept. 17 added two new funds to its sustainability suite.
TD North American Sustainability Equity Fund is an active North American equity solution that combines TDAM’s fundamental research process with environment, social, and governance criteria when selecting investments. It holds a diversified portfolio of North American securities, focusing on company’s ability to profitably generate and grow free cash flow and its efficiency at allocating capital, while also demonstrating positive contributions towards the Sustainable Development Goals as set out by the United Nations.
TD North American Sustainability Balanced Fund is a core North American balanced fund, aiming for income with the potential for capital appreciation while following a socially responsible approach to investing. This fund will focus on stock and bond investments that demonstrate positive contributions towards the U.N.’s Sustainable Development Goals. The common share investments will tend to focus on industry leaders that have sustainable competitive advantages evidenced by the high returns on capital, strong balance sheets, and management teams that are able to manage capital efficiently. The bond investments will focus on a combination of ESG-screened bonds that leverage TDAM’s proprietary ESG scoring system to select issuers with below-average ESG risks across the fixed income universe and ESG designed bonds, which include bonds issued under a green, sustainable or transition bond framework.
* BMO launches ESG portfolios. BMO Investments Inc. on Sept. 14 launched its BMO Sustainable Portfolios, a new suite of funds of funds that invest in companies committed to positive environmental, social, and governance (ESG) outcomes.
The portfolios combine equity and fixed income ETFs designed to represent the performance of companies that have high ESG ratings relative to their peers, as well as actively managed mutual funds that can provide risk mitigation and the potential to outperform the market. The new portfolios include:
- BMO Sustainable Income Portfolio
- BMO Sustainable Conservative Portfolio
- BMO Sustainable Balanced Portfolio
- BMO Sustainable Growth Portfolio
* RBC shutters five ETFs. RBC Global Asset Management Inc. announced on Sept. 15 that it will permanently close five ETFs effective on or about Nov. 27.
- RBC Strategic Global Dividend Leaders ETF (TSX: RLD), $12 million in assets.
- RBC Strategic Global Equity Leaders ETF (TSX: RLE), $2.7 million in assets.
- RBC Quant Global Infrastructure Leaders ETF (TSX: RIG), $12.6 million in assets. Also U.S. dollar version (TSX: RIG.U), $2.0 million in assets.
- RBC Quant Global Real Estate Leaders ETF (TSX: RGRE), $5.6 million in assets. Also U.S. dollar version (TSX: RGRE.U), $1.2 million in assets.
- RBC 6-10 Year Laddered Canadian Corporate Bond ETF (TSX: RMBO), $4.4 million in assets.
* Evolve launches leaders ETF. Evolve Funds Group Inc. on Sept. 14 debuted its Evolve Future Leadership Fund (TSX: LEAD), which invests in a diversified mix of domestic and foreign companies that the managers determine to be leaders in sectors that stand to benefit from medium and long term economic trends.
Raj Lala, President and CEO at Evolve ETFs, said “…there are a number of companies that are positioned to be future leaders in growth sectors, such as cloud computing, eGaming, cybersecurity, genomics and telehealth.” Evolve will act as portfolio manager and intends to implement this strategy across four sectors where clear trends are driving future growth.
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