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By Fund Library News Wire  | Friday, September 23, 2016

By Mike Keerma

* Market wrap: Fed decision revives sentiment
* 3 new Forstrong Global funds from iA Clarington.

* RBC adds 4 income ETFs.
* Horizons debuts 2 currency-hedged ETFs.

The main North American stock indices came back to life last week following the decision by the U.S. Federal Reserve Board to keep its trend-setting federal funds rate unchanged. And while the price of crude oil skidded -3.5% on Friday, oil still gained a respectable 3.4% on the week overall, lending at least some additional support to Toronto’s S&P/TSX Composite Index, which advanced 1.7% on the week. Likewise the main U.S. blue-chip benchmark, the S&P 500 Composite Index, and the tech-gauge Nasdaq Composite Index, both advanced 1.2% on the week. The S&P/TSX Composite is now up 13% on the year to date compared with 6% for the S&P 500 and Nasdaq.

After its meeting this past Wednesday, the Fed’s Open Market Committee announced that it would keep its fed funds rate unchanged as Fed Chairwoman Janet Yellen noted that growth had picked up in the most recent quarter while inflation remains below the Fed’s 2% annual target. In its accompanying statement, the Fed’s rate-setting committee said, “The case for an increase in the federal funds rate has strengthened but [the committee] decided, for the time being, to wait for further evidence of continued progress toward its objectives. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.” The timing of the next rate hike was not telegraphed either in the statement or in comments Ms. Yellen made after the announcement. Those who purport to read the Fed’s tea leaves take this to mean that a there won’t be a rate hike until December at the earliest.

In the meantime, the Bank of Japan invented a new tool that it calls “yield curve control,” which it says it will use to keep yields on 10-year government bonds at zero while keeping short-term rates negative, in effect steepening the yield curve. Some observers believe this new policy of yield curve targeting suggest the BoJ thinks that the more conventional monetary targeting policy has proven to be inadequate in boosting economic growth and reversing Japan’s perennial deflation.

Bank of Canada Governor Stephen Poloz joined the stand-pat chorus of central bankers last week with a speech entitled “Living Lower for Longer,” in which he reiterated that low growth and low interest rates have persisted for longer than the great economic minds of the age have anticipated, and are likely to continue to remain low for some time yet, unless output growth can be increased through structural reforms that remove impediments to business growth.

Bond yields fell again as sentiment soured after the Fed’s rate decision, while traders also mulled over the outlook for crude oil, as the prospect for a production pact by Opec members at next week’s meeting faded on continuing friction between Saudi Arabia and Iran. With energy prices a key component of inflation, the prospect of an increasing U.S. inflation rate was also dampened, and with it, the yield on the 10-year U.S. Treasury note, which fell to 1.615% on Friday, its lowest level in two weeks.


* 3 new Forstrong Global funds from iA Clarington. iA Clarington Investments launched three new global funds sub-advised by Forstrong Global Asset Management Inc., led by Forstrong’s President & CIO, Tyler Mordy. The actively-managed funds include Forstrong Global Strategist Income Fund, Forstrong Global Strategist Growth Fund, and Forstrong Global Strategist Balanced Fund. The funds aim to invest globally, including in developed markets. “Our approach seeks to add diversity and differentiation to the typical core holdings of Canadian investors, primarily through exposure to non-traditional sources of alpha identified through our macro asset allocation strategy,” said Mordy.

* RBC adds 4 income ETFs. RBC Global Asset Management Inc. launched four new exchange-traded funds that it says are designed to offer income opportunities in today’s low-yield environment.

RBC Canadian Preferred Share ETF (TSX: RPF) invests in rate-reset preferreds of Canadian companies.
RBC Quant Global Infrastructure Leaders ETF (TSX: RIG) invests in a global portfolio of infrastructure companies such as utilities, transportation, energy, and communications using a rules-based, multi-factor approach.
RBC Target 2022 Corporate Bond Index ETF (TSX: RQJ) and RBC Target 2023 Corporate Bond Index ETF (TSX: RQK) offer a specific maturity structure to facilitate laddering strategies and are designed as a replacement for holding individual corporate bonds

* Horizons debuts 2 currency-hedged ETFs. Horizons ETF Management (Canada) debuted its Horizons S&P 500 CAD Hedged Index ETF (TSX: HSH) and the Horizons US 7-10 Year Treasury Bond CAD Hedged ETF (TSX: HTH), offering currency hedged exposure to U.S. equity and government bond asset classes.

Check Fund Library’s Market Activity page regularly for active updates on key market indexes and commodities.

@FundLibrary – Follow Fund Library on Twitter for daily information and updates.


© 2016 by Fund Library. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited.

The foregoing is for general information purposes only and is the opinion of the writer. No guarantee of investment performance is made or implied. It is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice.

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