Effective November 27, 2021, the deferred sales charge and low load sales charge purchase options will no longer be available for purchase on Sun Life Global Investments mutual funds. Switches between funds of the same sales charge purchase option will be permitted.

Granite Managed Portfolios Tactical Update

August 2021

Opinions as of August 15, 2021

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The views expressed in this tactical update apply broadly to all Sun Life Granite Managed Portfolios, whereas the tactical highlights and allocation data in the chart below are specific to Sun Life Granite Balanced Portfolio. For the latest information about other Sun Life Granite Managed Portfolios, including Sun Life Granite Managed Income Portfolios, please refer to our quarterly fund reviews.

The market’s 17-month bull run continued in August, with the S&P 500 setting new highs. Many of the themes that have stoked investor confidence, remain in place: interest rates are effectively at zero, more fiscal stimulus could be coming in the U.S. and earnings growth remains solid. But there are cracks starting show. Among them: the economy, hampered by the Delta virus has slowed, valuations are stretched and China’s sweeping regulatory crackdown added to concerns about the country’s slowing growth. 

The future direction of interest rates could also trigger volatility in the weeks ahead. The U.S. Federal Reserve has continued to prioritize employment over inflation and held the line on interest rate increases. But at its August meeting, it did discuss reducing (tapering) its $120-billion-a-month, bond buying program. Following the 2008 financial crisis, the market had a “taper tantrum” and sold off when the Fed announced it was about to taper. This time the market, looking for a clear signal from the Fed, shrugged it off – at least for now.

From our perspective all these risks back into our risk/return equation. As such, we have reduced our equity exposure to neutral. However, despite the S&P 500’s run-up, we still believe the U.S. market has the strongest upside.

In terms of U.S. equities, as we brought our weighting down to neutral, we continued to hold high-quality growth companies. However, we increased our exposure to value and cyclical stocks, through both active and passive strategies. And we have a sleeve of global small-and-mid-cap equities. While growth and value have led at different times in the market rebound, we believe value could lead again as the next leg of the economic recovery kicks in. Ultimately, however, we expect growth to resume its leadership. 

Over the last year, the S&P/TSX Composite index, up 21% for the year on August 30, has been one of the top-performing markets. It has benefitted from the country’s employment recovery and high vaccine rates. As well, consumer debt levels have dropped, and the savings rate has increased. The energy sector, buoyed by the doubling in the price of oil over the last year, has also helped the economy.

Valuations on the S&P/TSX are not as high as the S&P500. But after its strong run-up, we held to our neutral position in August. That said, the index is heavily weighted in energy and financials. Both of those sectors have been top performers this year. They could continue to perform well if interest rates rise and a global recovery continues to support higher oil and gas prices.

Throughout the market rally our largest equity overweight was in emerging markets (EM). But with headwinds in a number of areas, we have moved to neutral. For one, China, in what President Xi Jinping calls “common prosperity” has clamped down on a broad number of sectors. At one point, Xi’s campaign erased the market value of the country’s largest companies by $1 trillion.

As well, while vaccination rates have started to trend up in many EM countries, the rollout has been inconsistent and hindered economic growth in others. Moreover, the Fed is moving closer raising interest rates. This could cause the U.S. dollar to rise in value. While this would help EM countries exporting products priced in U.S. dollars, it would hurt more import dependent economies.

August. 30. However, some major EM countries including India and Brazil have performed well. And we are being selective, both in terms of market segments and individual countries.

At minus 1.5% international equities are our largest underweight. The European economy is improving, but at slower pace than the U.S., with growth expected to come in at 4.6 % in 2021. While 70% of Europeans are now fully vaccinated, a slower rollout of vaccines compared to the U.S., led to longer lockdowns and has been a major factor in holding back the recovery. At 6% of GDP there has also been less fiscal support for the Eurozone economy, compared with 14% in the U.S. However, we will be looking for opportunities to invest in the coming months. 

Canadian bonds were down 2.4%, and U.S. Treasuries 0.6% for the year at the end of August. By comparison high yield corporate bonds were up 3%. Given this, we continued to be underweight duration sensitive issues, and we expect some expansion of yields to further hurt their performance. Alternatively, we remained overweight high yield corporate bonds, with a specific allocation to intermediate-term corporates. 

Tactical Highlights

Change   Rationale
Reduced exposure to U.S. equities  Valuations stretched after long rally
Reduced weighting in emerging market equities   Slowing growth, regulatory crackdown in China
Moved to overall neutral equity weighting Valuations, growth and interest rate concerns

Tactical Allocations | Sun Life Granite Balanced Portfolio

The graph shows the tactical allocations for the Sun Life Granite Balanced Portfolio. It is a stacked bar graph with each bar being the same height, representing 100% of the total asset allocation for the fund.  There are no numbers on the graph. It is intended to provide an approximate representation of the Funds’ asset allocation.   The X-axis represents the months from FEBRUARY 2020 to JULY 2021.  The Y-axis represents the percentage allocated to 12 asset classes as follows:  For JULY 2021, Canadian equity, U.S. equity, and International equity are large segments at the top of the bar, representing approximately 45% of the bar. Next, Emerging market equity, Global equity and Real assets segments make up about 15% of the bar. Next, Canadian Bonds makes up approximately 20%. U.S. Bonds is approximately 5%, and the remaining 10% is comprised of Global Bonds, Emerging Markets Bonds, High yield bonds and Cash.  The months prior to JULY 2021 show variations of these values, illustrating shifts of asset allocation over time as some asset classes shifting the others higher or lower as a percentage of the total.


Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Investors should read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in security value and reinvestment of all distributions and do not take into account sales, redemption, distribution or other optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

This document is provided for information purposes only and is not intended to provide specific individual financial, investment, tax or legal advice. Views expressed regarding a particular company, security, industry or market sector should not be considered an indication of trading intent of any mutual funds managed or sub-advised by SLGI Asset Management Inc. These views are not to be considered as investment advice nor should they be considered a recommendation to buy or sell. Information contained in this document has been compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made with respect to its timeliness or accuracy. This document may contain forward-looking statements about the economy, and markets; their future performance, strategies or prospects. Forward-looking statements are not guarantees of future performance and are speculative in nature and cannot be relied upon.

© SLGI Asset Management Inc., 2021. SLGI Asset Management Inc. is a member of the Sun Life Financial group of companies.