Signature Select Canadian Fund First Quarter Commentary
As at March 31, 2013
At Signature, we started 2013 with a positive outlook for equities on the basic premise that, led by the U.S., global economies and financial markets would continue to recover, but that the recovery would remain slower than traditional economic recoveries because of the dual headwinds of deleveraging and fiscal restraint.
We believed that so long as credit and capital markets remain open and functioning, then the U.S Federal Reserve's policies will force investors out of risk-free assets that now earn zero (negative returns after inflation) and toward global equities. While nothing has changed with respect to our views on the Fed, the dramatic change in policy at the Bank of Japan in early April only reinforces our view.
Having laid out our call for stronger global equity markets, it is also worth expressing our view on the key economic drivers around the world. In a nutshell, we remain most upbeat on the outlook for the U.S. private sector, followed by China's ability to manage slower yet still strong growth. In Japan, we expect a strong year but remain skeptical about longer-term structural reform. Europe will remained mired in a stagnant state of mild recession as it continues its internal rebalancing and debating what it should look like when it grows up. Ultimately, we expect the policy debate in Europe to shift from austerity and towards growth, but not before German elections in September. It is, however, important to bear in mind that buying European companies is not the same as buying into the European economies, and the concerns in Europe have resulted in attractive valuations for many European-listed multinationals with strong global franchises.