How did she achieve this? And what are the expectations for the future? To see things more clearly, The Press spoke with Vincent Delisle, Senior Vice President and Head of Liquid Markets at the Caisse de dépôt.
What is your assessment of the first half of the year in the stock and bond portfolios under your supervision?
Vincent Delisle: In our fixed income portfolios [obligations, titres de crédit privé, etc.]the challenge of the first half of the year that had the greatest impact on our performance was the rise in long-term bond yields, which reduced the value of bonds already on the market. This rise in rates was attributed mainly to the resilience of the US economy, which proved stronger than expected at the beginning of the year. This resilience prompted the Fed [Réserve fédérale américaine] to keep interest rates high as financial markets expected the start of rate cuts. Despite this unfavourable backdrop for fixed income markets, we were able to limit our negative return to 1.7%, the same level as our benchmark.
And on the stock market?
VD: In our stock portfolios, on the other hand, we are very pleased to have obtained a return of 13.6% during the first half of the year, which surpassed that of our benchmark index. [à 13,2 %]. And this advantageous performance was achieved despite a context of very strong concentration of gains on the American stock market among less than ten large technology stocks.
In fact, half of the return of the US S&P 500 stock index in the first half of the year came from just seven major technology stocks, and 25% from Nvidia alone. [microprocesseurs en intelligence artificielle].
Such concentration of stock market gains represents a particular challenge for diversified and long-term portfolio managers like those at the Caisse. But we were able to hold our own thanks to the excellent stock selection by our portfolio managers who are based in Montreal.
What are the prospects for the second half of 2024?
VD: The economic slowdown that is underway in the United States [après un premier semestre plus fort que prévu] is at the top of the list of potential impacts on our financial market securities portfolios. Will this slowdown be mild or severe? If it worsens, this slowdown could accelerate the rate cuts expected from the US Fed. In this case, our fixed income portfolios [obligataires] would be well positioned to deliver good returns by year-end.
On the other hand, in the stock markets, volatility could increase over the coming months. On the one hand, in the United States, the overconcentration of stock market gains among a few big technology stocks seems to be easing in recent weeks. On the other hand, the stock markets could also be affected in the short term by surprises in the presidential election in the United States, as well as jolts in geopolitical tensions elsewhere in the world.
Do you have any advice for small investors?
VD: My basic advice is not to let yourself be affected by short-term upheavals in the financial markets. And to stay focused on your investment objectives over a longer term horizon, over five or ten years. Second piece of advice: diversifying your investments pays off in the long term.
There are times when it’s less profitable, like this year with the overconcentration of gains among a few big tech stocks in the United States. But in the long term, being well diversified allows us to achieve our investment objectives.
Finally, third piece of advice, small investors must ensure that they maintain a level of risk in their portfolios that is well aligned with their personal risk profile. This is what we do at the Caisse de dépôt with the depositors who entrust us with the management of their assets. The assessment of their risk profile is the basis of our process for constructing and managing their portfolio.