Harvest ETFs Monthly Insights (March 2024 Summary)
Harvest ETFs
Consistent monthly income and growth-focused investment solutions designed for Canadian investors.
Macro Snapshot: The March of Our Market Contentment
March gave us something that every exhausted investor has been crying out for almost since the COVID-19 pandemic began: a boring, positive month. US markets rose steadily in March, with real breadth across sectors. After leading market growth for most of the past 18 months, the technology sector was near the bottom of the pack, while still posting positive returns. That turn does not demonstrate new weakness in tech as much as it demonstrates new strength in broader equity markets and overall investor sentiment. The momentum we saw building in late January and February continued to roll on through March.
Some of that positivity in investor sentiment comes from a stronger-than-expected US economy and US consumer. While that is broadly good news, it does impact the outlook for interest rate cuts going forward. Fed Chair Jerome Powell ‘penciled in’ three 25 basis point cuts before the end of the year at the March FOMC meeting. However, a combination of stronger US economic data and somewhat persistent US inflation has impacted the outlook for when exactly those interest rate cuts will come.
Harvest ETFs Interactive Booklet Update (as at March 28, 2024)
As investors revised their outlooks for Fed cuts, fixed income markets became volatile. The active covered call strategies employed in our fixed income ETFs (particularly HPYT and HPYM) allowed us to take advantage of that volatility and turn it into additional cashflow. However the underlying ETFs were still subject to the downward pressures caused by rising longer-term rates.
Geopolitical uncertainty also introduces the prospect of greater volatility on equity markets. Whether it’s conflicts in the Middle East and Eastern Europe, or ongoing trade tensions between the US and China, exogenous risks persist. Some investors have sought gold exposure to hedge against those risks as well as against inflation, pushing gold prices to new highs. We can say with some relief, though, that those tensions did not derail the positive investor sentiment we saw in March.
That positive sentiment seems focused, largely, on the increasing likelihood that the US negotiates a soft landing or even a no landing scenario. Key to those outcomes will be that the US economy slows enough to bring inflation closer to the Fed’s 2% target rate while maintaining growth — a no landing — or only slipping into negative growth for a single quarter — a soft landing.
Year to date, the maximum drawdown in the broader US markets has been less than any calendar year since 1980. Given some of the macro narratives highlighted above, it would not be unexpected to see some volatility resurface, however we maintain our views that the general positive sentiment, macro fundamental back drop and expanding breadth remain supportive and that the “buy the dips” theme remains in-tact.
Our covered call strategies were executed in line with a somewhat lower volatility market environment. We legged into selective positions to maximize cash flow and upside exposure. In our fixed income ETFs, we were more systematic, reflecting the view that in the current environment we aimed to hit our cash flow targets early in the period rather than speculate on where longer-term rates may be going over the course of the month.
In this environment we continue to advocate for diversification, as both protection against exogenous risks and a driver of consistent returns in a broadly positive market. Investors seem ready to buy dips, so we are viewing any market pullbacks opportunistically with the view that they should be short and shallow.
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Please see the table of cash distributions for our equity-income and enhanced equity-income ETFs for the month ended March 31, 2024. Click here to view the full press release.
ABOUT HARVEST ETFS:
Founded in 2009, Harvest Portfolios Group Inc. is an independent Canadian Investment Fund Manager. At Harvest, our guiding principles are premised on building wealth for our clients through ownership of strong businesses that have the potential to grow & generate income over the long term. Harvest has an established track record with its stable of equity ETFs. Now, in 2024, Harvest has expanded its income philosophy to introduce Fixed Income ETFs to our innovative lineup. Harvest now offers exposure to the highest-rated bonds like US Treasuries, coupled with its covered call strategy that provides high yields to increase monthly income. Read More
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For information purposes only and does not constitute an offer to sell or a solicitation to buy the securities referred to herein or used to engage in personal investment strategies. Please consult your investment advisor.
Certain statements in this document are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature and depend upon or refer to future events or conditions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. Unless required by applicable law, Harvest Portfolios Group Inc. does not undertake, and specifically disclaim, any intention or obligation to update or revise any FLS, whether as a result of new information, future events or otherwise.
Commissions, management fees and expenses all may be associated with investing in Harvest Exchange Traded Funds (managed by Harvest Portfolios Group Inc.). Please read the relevant prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account income taxes payable by any security holder that would have reduced returns. The funds are not guaranteed, their values change frequently and past performance may not be repeated. Tax, investment and all other decisions should be made with guidance from a qualified professional.