balanced fund quarterly report

June 30, 2019

Economic Commentary

The ongoing trade war between the U.S. and China continues to provide a high degree of uncertainty for global financial markets. Potential outcomes could have a dramatic impact on future growth prospects for the global economy, both positive and negative. The U.S. Federal Reserve has shifted fairly abruptly from its original path of embarking on a tighter monetary policy to now preparing markets for the possibility of an interest rate cut. The FED would like to see some sort of resolution or at least substantive progress being made with regard to the U.S./China trade discussions not wanting to act pre-emptively if a trade deal is imminent.

Expectations are for the Bank of Canada to maintain its neutral stance with regard to its interest rate policy. The BOC could remain on hold into 2020. The Canadian economy bounced back nicely with two solid months of GDP growth, following a soft patch earlier in the year. Job growth continues to be strong, providing further support to the Canadian economy.

The disconnect between the equity and bond markets continues. Interest rate levels in the bond market have declined dramatically, foreshadowing global economic concerns and uncertainty. Equity markets, on the other hand, remain at elevated levels. At some point relative market levels between equity and bond market valuations will need to revert back to a more normal relationship.

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