Sun Life Granite Managed Portfolios

Fund commentary | Q1 2024

By SLGI Asset Management Inc. Opinions and data as of March 31, 2024 unless otherwise noted. 

Q1 Tactical asset allocation

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 Q2 2022 to Q1 2024.  The Y-axis represents the percentage allocated to 12 asset classes as follows: For Q1 2024, Canadian equity, U.S. equity, and International equity are large segments at the top of the bar, representing approximately 40% 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 15%. U.S. Bonds is approximately 10%, and the remaining is comprised of Global Bonds, Emerging Markets Bonds, High yield bonds and Cash.

Allocations are as at quarter-end and subject to change without notice. The graph above provides an at-a-glance comparison short-term portfolio allocations (tactical). With this information you are able to see how the portfolio composition reflects our investment views, and how the composition evolves over time in accordance with an ever-changing market environment.

Key tactical changes

  • Modestly overweight equity: We are largely neutral across developed market equities. We are optimistic about emerging market equities because of attractive valuations, especially in China.
  • Underweight Canadian investment grade (IG) bonds: We trimmed our Canadian IG bond exposure to reduce overall duration of our bond portfolios.
  • Trimmed underweight position in global high-yield (HY) bonds: We are currently neutral to this asset class as major sectors such as energy, face less reinvestment risk. A better global growth outlook and higher commodity prices have also improved the prospects for HY issuers.

Major equity markets across the globe posted robust performance in Q1 2024. The benchmark S&P 500 Index rose 10% and hit 22 new all-time highs during the period. Benchmark indexes in Canada and Europe also posted high-single digit gains. Much of the optimism for stocks came from expectations that inflation across developed markets was falling to a target rate of 2% and that interest rate cuts from central banks were around the corner. In January 2024, markets expected the U.S. Federal Reserve to cut interest rates by 150 basis points (bps). 

But during Q1 2024, record jobs data and sticky inflation clouded the outlook for rapid interest rate cut expectations. U.S. CPI came above expectations for three straight months in Q1 2024 and held above the 3% level in March. On the other hand, job gains blew past expectations in the first quarter. By April, both these factors forced the market to reset its interest rate cut expectations to just two or three 25 bps cuts in 2024. While we believed that equity markets’ expectations for six interest rate cuts was too optimistic, we agree with bond markets that have a more nuanced view of the magnitude of interest rate cuts. 

The 10-year U.S. Treasury touched 4.5% in early April, the highest level since November 2023. We think this reflects the U.S. economy’s resilience and that rate decreases could be delayed to the second half of 2024. 

We also think the likelihood of a recession across major economies has come down. We say this because the manufacturing sector that underpins these economies has witnessed a surprising turnaround. The S&P Global Manufacturing Purchasing Managers’ Index (PMI), which flashed red throughout 2022 and for most of 2023, has rebounded across the Euro zone, Canada and the U.S. despite high interest rates. Further, services sectors in these regions are showing signs of resilience. 

Despite this recovery, we see a slowdown in economies that are more interest rate sensitive than the U.S. In the Euro zone and in Canada, labour markets and consumers are showing signs of strains due to elevated interest rates. Further, these economies haven’t seen the same level of fiscal spending as the U.S., where budget deficit as a percentage of gross domestic product (GDP) has hovered over 6%. Given this situation, we think central banks in Europe and Canada could cut interest rates ahead of the Fed. We also expect the relative interest rate differential between the U.S. and the rest of the world to further strengthen the U.S. dollar. 

As for our tactical positioning, we are moderately overweight equities. We are cautiously optimistic about emerging market equities thanks to a rebound in commodity prices. We also see attractive valuations in China as the country emerges from 18 months of deflation. We are neutral towards both Canadian and U.S. equities. We also turned underweight Canadian investment grade bonds to reduce the overall duration of our bond portfolios. As well, we eliminated our underweight position to global high-yield (HY) bonds and turned neutral as they face less refinancing risks in the coming months. 

Contributors (+) and detractors (-)


+ Bonds underweight

+ U.S. equity managers

+ Canadian and U.S. fixed income managers

- Canadian equity managers

- Cash overweight


+ Bonds underweight and equities overweight

+ Fixed income managers


- Overweight Canadian bonds vs underweight high yield bonds

- Equity managers

View fund performance (Series F)


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 by SLGI Asset Management Inc. These views are subject to change and are not to be considered as investment advice nor should they be considered a recommendation to buy or sell. This commentary is provided for information purposes only and is not intended to provide specific individual financial, investment, tax or legal advice. Information contained in this commentary 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.

The indicated rates of return is 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.

This commentary may contain forward-looking statements about the economy and markets, their future performance, strategies or prospects or events and are subject to uncertainties that could cause actual results to differ materially from those expressed or implied in such statements. Forward-looking statements are not guarantees of future performance and are speculative in nature and cannot be relied upon.