Market commentary
After two stellar months, markets took a breather in June, with stocks slipping slightly and Canadian bonds posting modest gains. At some point, back in May, the market must have believed President Donald Trump’s 38 proclamations that the war with Iran was over, because news of a ceasefire barely fazed investors in June. Oil prices did fall 19% to roughly $70 per barrel, which may be the best indication that the worst of the conflict is behind us.1
While June didn’t deliver much market action, it did cap off the best quarter for the S&P 500 in six years, with returns of 14%! The takeaway? When it comes to investing, don’t over-weight the importance of geopolitics and don’t let the media get to you. Even if you sold your stocks in the very early days of the conflict, you still would have missed out on roughly a 10% gain. Timing the market is all but impossible—you never know what will happen next or how markets will respond. Rebalance and seek new opportunities, absolutely. But never sell out of fear.
Our strategies (your portfolios) have navigated these tumultuous months in epic fashion—capturing less downside and more upside. That performance edge is a direct result of better diversification, which we believe is a structural and durable advantage. Despite all the noise, we are sleeping well at night knowing we are protecting your capital, while capturing what could be a generational market opportunity brought on by artificial intelligence, market reforms and a restructuring of global trade and geopolitics.
Chart of the month: Magnificent 7 fall behind
Over the past year or so, we’ve written extensively about the level of concentration within the S&P 500. The Magnificent 7 (“Mag 7”)—Apple, Alphabet, Meta, NVIDIA, Tesla, Microsoft, and Amazon—collectively generated a massive share of overall market returns for several years. Many investors (ourselves included, at times) worried about the broader market risks if these companies stumbled. So far, those concerns appear to have been unfounded. Even during the Mag 7’s 15% selloff through March, the S&P 500 remained remarkably resilient. The magnificent 7 are essentially flat year-to-date, yet the S&P 500 is up nearly 10%. That’s remarkable when you consider that those seven companies account for roughly one-third of the index. If we isolate the other 493 companies (and, unsurprisingly, there’s an ETF for that), they’ve collectively gained nearly 15%.
The takeaway? Market leadership has broadened. Positive returns are being generated by a much larger number of stocks, rather than only a handful of mega-cap winners carrying the entire market. This trend has been evident in the performance of our two actively managed equity funds, which ha v e delivered outstanding returns year-to-date, due in part to this broadening effect.
Content Recommendation: Capturing growth opportunities with private markets
A short video from Hamilton Lane explaining why so much value creation now happens while companies are private, before their initial public offering (IPO). We’ve highlighted SpaceX multiple times as a great example, this video does a great job explaining the thesis.
Capturing venture growth: A conversation about private markets opportunities
Portfolio strategy
Debt
Liquid fixed income
- Bond markets continue to struggle with higher inflation and the risk of higher interest rates.
- The European Central Bank raised interest rates by 25 basis points and the newly appointed Chairman of the U.S. Federal Reserve held his first policy meeting that saw many governors leaning towards higher rates.
Private credit
- Redemption pressures persist but there are still minimal signs of pressure on portfolio assets at the large, high-quality managers.
- We reduced exposure nearly a year ago, currently underweight (essentially none in Growth portfolios).
- Our two core PC holdings just received the highest rankings by Morningstar.
Equity
Public equity (stocks)
- The SpaceX IPO was the main event for the stock market in June. It initially rose on the back of all the hype, however, it has since languished and currently trades below its price at opening. Perhaps lending support to the argument that increasingly, value creation is being captured prior to public listings.
- Power American Growth Fund (held in Growth and Balanced) delivered an exceptional month, up 6.5%.
Private equity
- Portfolios are seeing excellent exit activity including initial public offerings (two funds owned SpaceX).
- Private equity portfolios own a diversified mix of boring but profitable value-oriented companies along with some of the fastest growing companies ever.
- Capturing exponential growth before companies go public seems to be increasingly important.
Real assets
Real estate
- Portfolios contain only minimal real estate exposure through a small allocation in Apollo Aligned Alternatives.
- Returns seem to be improving, but on balance, we see better opportunities in infrastructure.
Infrastructure
- Energy, defence, data centres, transportation, are all durable, persistent growth themes globally.
- Inflation is rising. Infrastructure historically performs very well during periods of high inflation.