balanced fund quarterly report

September 30, 2017

Economic Commentary

The low interest rate environment has helped fuel equity markets to record highs. Despite the high level of uncertainty and geopolitical risks in the market, volatility remains muted. The Bank of Canada raised interest rates twice in the period catching investors off-guard. The Canadian dollar rallied, however it did pull back late in the quarter as the Bank of Canada indicated that any future interest rate moves would be data dependent. The Canadian economy expanded at a 4.5% annual rate in the second quarter following a 3.7% pace in the first quarter, making it the fastest growing economy in the G7. The Canadian consumer led the way, fueled by low interest rates and a strong job market. Economic growth is expected to subside over the balance of the year due to the impact of higher interest rates as well as a slowdown in the Toronto housing market. After raising interest rates twice during the first half of the year, the U.S. Federal Reserve remained on hold during the third quarter. Lower-than-expected inflation continues to be the main catalyst that could prevent the Fed from raising rates over the near-term. The Federal Reserve announced that it would be shrinking its balance sheet, which was used to keep rates low for a prolonged period by purchasing various securities. With the U.S. economy on a firmer footing and a robust employment picture, quantitative easing measures are no longer warranted.

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