Download Trade Log March 2016 - Cougar Global Investments

Trade Log
Asset Allocation Changes – Effective March 17, 2016
Cougar Global Investments
In March attention has been focused on central bankers at the ECB, Fed, and Bank of Japan. The ECB surprised everyone by
the size and range of measures it announced with the intention of stimulating growth and inflation. The Bank of Japan stood
pat, as did the Fed, as both we and the consensus expected. The key positive point was the Fed’s lowering its projections for the
future path of rate hikes. Although we had prepared our MES Outlook and the resulting adjustments to our asset allocation before the
Fed announcement, we made the decision to wait until after the Fed meeting to initiate our trading, just in case the Fed decided to spring
a negative surprise. We made adjustments to all of the mandates. In the GTS w/ Conservative Growth, GTS w/ Moderate Growth, and
GTS w/ Growth mandates we maintained the February equity weights (33%, 43%, and 58% respectively) but adjusted the fixed income
exposures to be less concentrated in mortgage-backed securities (MBB) and reduced Treasuries (GOVT) in favor of the broader U.S.
aggregate bond index (AGG). In the GTS w/ Income mandates, we reduced fixed income exposure by 10% to 65%. We also adjusted
the relative weights, reducing MBB and adding to GOVT and AGG. We increased equity exposure slightly by adding 5% to MDY. We
also introduced 5% IAU (gold), primarily as an inflation hedge. Market-based inflation expectations have risen much sooner than we
had previously anticipated. Moreover, as I explained last month, gold has resumed its status as a safe haven, particularly for those who
do not want to increase $US exposure (e.g., European or Japanese savers facing negative yields on bonds). Gold is also benefitting from
central bank buying to diversify reserves out of $US, as well as from retail buying in India and China by those who see gold jewellery as
a store of wealth that is preferable to their local currencies. Although we slightly reduced both Growth and Inflation in our MES
Outlook, we continue to place a higher probability weight on Growth (8%) and Inflation (8%) than the consensus, which
anticipates neither Growth nor Inflation but only Stagnation (100%) over the next year. Our research continues to indicate that the
Q2’16 data are likely to provide a positive surprise, indicating that the U.S. economy is growing at its potential. The housing and labor
markets continue to improve. The unemployment rate continues at an eight-year low, and the long-term jobless rate (U6) is at its lowest
level since the financial crisis. There is evidence of wage and income growth. Consumers, although saving more, are also spending
more. Household net worth is near its all-time high. Consumers remain somewhat optimistic about the economy. Solid employment
gains and a pick-up in wage growth should help drive consumption up in the second quarter. The probability that the U.S. economy will
continue to grow sluggishly thereafter, is slightly higher than last month (Stagnation 76%). Neither we nor the consensus anticipates
a negative quarterly GDP growth rate over the next twelve months (Recession 0%). Since WW II, the U.S. economy has proven its
resiliency no matter who occupies the White House. We raised the probability of Chaos from 6% to 8% in January and continue with an
8% weight for a Chaos scenario. The migration crisis in the Eurozone continues to undermine the viability of the European project.
The U.K referendum on Brexit June 23rd poses a greater threat than generally recognized. The possibility remains of an accidental
confrontation in the East and South China Seas. The Fed’s pause in its normalization process has relieved some of the immediate
pressure on indebted emerging economies.
Dr. James Breech, March 18, 2016
ASSET CLASS
Symbol
GTS w/ Income
GTS w/ Conservative Growth
GTS w/ Moderate Growth
GTS w/ Growth
Current
Month
Previous
Month
Change
Current
Month
Previous
Month
Change
Current
Month
Previous
Month
Change
Current
Month
Previous
Month
Change
S&P 500
SPY
10
10
0
20
20
0
18
18
0
20
20
0
S&P 400
MDY
15
10
5
13
13
0
20
20
0
25
25
0
S&P 600
IJR
0
0
0
0
0
0
5
5
0
13
13
0
Japan Currency Hedged
HEWJ
0
0
0
0
0
0
0
0
0
0
0
0
Eurozone Hedged
HEZU
0
0
0
0
0
0
0
0
0
0
0
0
25
20
5
33
33
0
43
43
0
58
58
0
MBB
25
50
-25
20
25
-5
15
25
-10
10
20
-10
U.S. Aggregate Bonds
AGG
15
10
5
30
20
10
30
15
15
25
15
10
U.S. Treasury Bonds
GOVT
25
15
10
10
15
-5
5
10
-5
0
0
0
TOTAL EQUITIES
Barclays Capital US
Mortgage-Backed Securities
TOTAL FIXED INCOME
65
75
-10
60
60
0
50
50
0
35
35
0
GOLD
IAU
5
0
5
5
5
0
5
5
0
5
5
0
CASH
CASH
5
5
0
2
2
0
2
2
0
2
2
0
For Broker-Dealer Use Only – Not for Use or Distribution with the General Public. See over for important disclosures.
Cougar Global Investments Ltd. 357 Bay Street, Suite 1001, Toronto, ON M5H 2T7 1-800-387-3779 [email protected] CG1388 EXP 4/30/2016
IMPORTANT DISCLOSURES
Cougar Global Investments Limited (Cougar Global) is an investment manager that utilizes tactical asset allocation to construct globally diversified
portfolios. Effective 4/30/15 Cougar Global was acquired by Raymond James Financial, Inc. (NYSE:RJF) and became an affiliate of Eagle Asset
Management, Inc. a wholly-owned subsidiary of Raymond James Financial, Inc. Prior to 4/30/15 Cougar Global was an independent investment
management firm not affiliated with any parent organization. Cougar Global is registered as a Portfolio Manager with the Ontario Securities
Commission (OSC) and with the United States Securities and Exchange Commission (SEC) as a Non-Resident Investment Advisor. Prior to 01/02/2013,
the firm was named Cougar Global Investments LP.
Principal Risk: An investment in Exchange Traded Funds (ETF), structured as a mutual fund or unit investment trust, involves the risk of losing money
and should be considered as part of an overall program, not a complete investment program. An investment in ETFs involves additional risks: nondiversified, the risks of price volatility, competitive industry pressure, international political and economic developments, possible trading halts, and
index tracking error.
International and emerging market investing involves special risks such as currency fluctuation and political instability and may not be suitable for all
investors.
Stock investing involves risk, including the risk of loss.
High Yield/Junk Bonds are not investment grade securities, involve substantial risks and generally should be part of the diversified portfolio of
sophisticated investors.
Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and
credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity and redemption features.
Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and are subject to availability
and change in price.
Mortgage-Backed Securities are subject to credit, default risk, prepayment risk that acts much like call risk when you get your principal back sooner
than the stated maturity, extensions risk, the opposite of prepayment risk, and interest rate risk.
Government bonds and Treasury bills are guaranteed by the U.S. Government as to the timely payment of principal and interest and, if held to
maturity, offer a fixed rate of return and fixed principal value.
The fast price swings of commodities will result in significant volatility in an investor’s holdings.
The prices of small and mid-cap stocks are generally more volatile than large cap stocks.
Precious metal investing is subject to substantial fluctuation and potential for loss.
The fund’s concentrated holding will subject it to greater volatility than a fund that invests more broadly.
This research material has been prepared by Cougar Global Investments.
Cougar Global MES – Source: Cougar Global
Cougar Global’s Macro Economic Scenario Analysis assigns probabilities to each of the 5 economic scenarios over the next 12 months.
Macroeconomic scenarios are based on quantitative data sourced from various firms and then weighted and may be adjusted based upon Cougar
Global Investments thought capital. MES are subject to change.
Asset allocation and diversification do not ensure a profit or protect against a loss. All investments are subject to risk. There is no assurance that any
investment strategy will be successful or that any securities transaction, holdings, sectors or allocations discussed will be profitable. Strategies
discussed are subject to change at any time due to market conditions or opportunities. The securities identified and described do not represent all of
the securities purchased, sold, or recommended for client accounts. The reader should not assume that an investment in the securities identified was
or will be profitable.
Past performance does not guarantee or indicate future results. There is no guarantee that these investment strategies will work under all market
conditions.
NOTE: These are hypothetical examples and are not representative of any specific situation. Actual economic results may vary. Economic forecasts set forth
may not develop as Cougar MES indicates.
For Broker-Dealer Use Only – Not for Use or Distribution with the General Public.
Cougar Global Investments Ltd. 357 Bay Street, Suite 1001, Toronto, ON M5H 2T7 1-800-387-3779 [email protected]