While US equities were relatively calm in July, volatility began rising in European equities and currencies. Notably, the Canadian dollar strengthened 3.8% versus the US dollar in July alone. This volatility in currency and European equity markets has spilled into global equities thus far in August.
As we have written in recent months, and in particular in our musing last Friday, the data does not support being fully invested at this time. Valuations are by no means outrageous, however, corrections are a normal part of healthy bull markets, and our screening tools are not finding companies that meet our strict investment criteria. As a result, we continue to have cash in our equity portfolios that is ready to be deployed when a correction occurs, with the AFINA Optima10 sitting with 24% cash and the AFINA Affinity at 48% cash.
The bottom performers in our portfolios during July were Seagate Technology, Gluskin Sheff + Associates and Qualcomm. The top performers were Gilead Sciences, CIBC and Waddell & Reed Financial. Notably, one of our key holdings Michael Kors announced on July 25, 2017 that it is buying luxury shoemaker Jimmy Choo, and earlier this week Michael Kors raised its guidance in a sign that negative same-store sales pressure is subsiding.
An overview of the performance of our actively-managed products is as follows:
- The AFINA Optima10 was down 1.9% in July, and was up +23.9% in 2016 compared to the benchmark return of 14.8%. We estimate that the rapid appreciation in the Canadian dollar negatively impacted the portfolio by approximately 2.1% in July.
- The AFINA Affinity was down 1.1% in July, and was up +20.6% in 2016 compared to the benchmark return of 14.8%. We estimate that the rapid appreciation in the Canadian dollar negatively impacted the portfolio by approximately 1.2% in July.
As of July 31, 2017. All figures are net of fees and other expenses. Past performance is not indicative of future results. Refer to https://www.afinacapital.com/legal/ for full details and disclosures.
(1) The benchmark represents a 50% weighting of the S&P 500 Total Return Index in Canadian dollars and a 50% weighting of the S&P/TSX Composite Total Return Index in Canadian dollars.