The strengthening US dollar, tightening monetary policy and widening geopolitical risks have shaped the winners and losers in investors’ portfolios in the first half of 2018.

Big tech groups, oil and small cap US companies have proved the standout successes for investors since the start of the year, while eurozone periphery sovereign debt, emerging market currencies and equities, and Chinese stocks have all performed poorly.



Meanwhile, after last year’s rocket-fueled rise, it has been a steady descent for Bitcoin since the start of 2018. The controversial cryptocurrency’s price is down nearly 60% year to date.

During the first half of the year, North American stocks managed to shrug off trade war rumblings and tirades from President Donald Trump. In Canada, the S&P/TSX Composite finished June at essentially the same level it started the year. In the US, the S&P500 gained 2.3%.


Looking at the sectors, consumer discretionary, tech and energy have been the best performers so far this year. Consumer staples, financials, materials and industrials are solidly in the red.

Tech has been a notable outperformer thus far this year, with so called FAANG stocks all eclipsing the gains of the broader market.


The S&P/TSX Composite Index closed at 16,278 Friday June 29th for a second quarter gain of 5.9%, its best quarter since the end of 2013. Ongoing NAFTA negotiations coupled with tariffs on steel and aluminum, retaliatory measures from Canada, and the more dire threat of duties on autos are making investors nervous, but trade fears should ultimately be overshadowed by strong fundamentals.


Outside of the US and Canada, equity markets have struggled so far this year with Russia the only market to finish the first half in positive territory.

MSCI EAFE Index of foreign developed markets is down nearly 12% since late January and down 5% on the year.

Emerging economies began the year as a market darling only to be toppled by a surge in the dollar and rising political risks. A brewing trade war has dashed expectations and synchronized global growth would keep propping up equities. China, long seen as the world’s growth engine, entered bear market territory after a decline of over 20%.


US treasuries are down on the year as interest rates have risen. The US 10-year treasury yield rose to over 3% last month for the first time in more than 7 years.


Looking at commodities, oil is up more than any asset class at 25.4%. Gold and silver are both down 4% plus.


The buck is back. Tighter domestic monetary policy and global trade turmoil have set the US dollar for its best quarterly performance since December 2016, rising 5.2% against a weighted basket of global peers. Propping up the currency of late has been the Fed’s decision in June to raise interest rates, as expected, but also its forecast for a faster pace of monetary tightening this year than previously thought.

Among so-called G10 currencies, only the Japanese yen and Norwegian Krone have gained on the dollar this year, up1.7% and 0.7% respectively.


During the quarter, the Holdun Canadian Equity gained 4.3% (total return in local currency) and on a relative basis, the portfolio underperformed the S&P TSX by approximately 2.5%. Stock selection was primarily a source of relative under-performance during the quarter. Sector allocation was an added value and was primarily driven by our underweight exposure to financials.

The U.S. Equity market, as measured by the S&P 500 Index, gained 3.4% (total return), during the quarter. Financials was a detractor while Consumer Discretionary and Technology were contributors. On a relative basis, the Holdun U.S. Equity slightly underperformed its benchmark by 0.2%. Security selection slightly offset sector allocation within the US portfolio.

International Equity ex North America decreased by 2.1% during the quarter and outperformed its benchmark by 1.0%.




Global Equity




Global Fixed Income




Global Balanced




U.S. Equity




Canadian Equity (in USD)




Canadian Equity (in CAD)

2.2% 1.9%



We believe that an expanding US economy, a lower unemployment rate and rising inflation will support a gradual rise in interest rates from the Federal Reserve. The market still expects a slower pace in interest rate hikes than the Fed. The ongoing strength in the US economy provides room for further rate hikes and will be challenging for bond markets. Investors should be creative and flexible regarding fixed income investing, and therefore should consider non- traditional fixed income instruments (e.g. Holdun Income Fund), stay underweighted in government bonds or invest in short-term debt instruments. We believe that fundamentals and fiscal policy will be beneficial to equity markets. In Canada, elevated household debt makes its economy sensitive to rising rates. Bank research suggests higher rates, in Canada, are most likely to be manageable and the impact will be limited. Overall, we remain constructive on equity markets long term and believe a balanced strategic asset allocation should be between 50-60% equity and the remainder in fixed income assets.