March 31, 2025
Commentary
Monthly Update
Ninepoint Focused Global Dividend Fund - Compounded Returns¹ As of March 31, 2025 (Series F NPP964) | Inception Date: November 25, 2015
1M |
YTD |
3M |
6M |
1YR |
3YR |
5YR |
Inception |
|
|---|---|---|---|---|---|---|---|---|
Fund |
-7.75% |
-6.86% |
-6.86% |
2.66% |
11.88% |
10.44% |
13.34% |
8.78% |
S&P Global 1200 TR (CAD) |
-4.18% |
-1.14% |
-1.14% |
4.65% |
14.59% |
13.40% |
16.66% |
11.84% |
President Trump’s so-called Liberation Day of “reciprocal” tariffs has triggered the worst one-day selloff since the depths of the Covid-19 crisis in 2020. On a two-day basis, the roughly 10% drawdown is comparable to the 1987 stock market crash, the 2008 Global Financial Crisis and the Covid-19 pandemic. The math used to justify the retaliatory tariffs is dubious at best and the mechanism used to apply specific rates to individual countries seems to have come from ChatGPT or some other LLMs, based on attempts to recreate the logic.
The stock market understands the risks of Trump’s trade war and the bizarre situation of a single individual looking to break the global economy without much evidence of any tangible benefits in the future.
Beyond the ridiculous methodology, Trump’s ultimate goal of reshoring all industrial manufacturing to the United States seems questionable. Does he really believe that American consumers will be willing to pay significantly higher prices for domestically manufactured goods just to “Buy American”? It may not be a perfect system, but globalization has raised the standard of living around the world and generated tremendous wealth for millions and millions of people.
The stock market understands the risks of Trump’s trade war and the bizarre situation of a single individual looking to break the global economy without much evidence of any tangible benefits in the future. To be clear, the current tariff rates are worse than the worst-case scenarios of almost every economist or strategist. Most now expect that prices will surge, global growth will slow, and job losses will increase. Perhaps the correction becomes a true bear market before investors see some relief. But it is important to remember that selloffs eventually end and, given the pace of this most recent decline, even the tiniest bit of positive news could spark a powerful rally.
Importantly, valuations have become much more palatable, and the S&P 500 now trades back in line with the 10-year average forward P/E multiple of 18.5x (according to FactSet). We would also point out that the interest rate forward curve is currently pricing in four rate cuts in 2025, which should offer some downside support if the outlook continues to deteriorate. In this environment, we don’t want to panic, but we have reduced outsized allocations to individual stocks and investment themes while remaining invested in a diversified portfolio of dividend-paying, high quality companies.
Top contributors to the year-to-date performance of the Ninepoint Focused Global Dividend Fund by sector included Health Care (+32 bps), Energy (+11 bps) and Consumer Staples (+2 bps), while the Information Technology (-392 bps), Industrials (-114 bps) and Utilities (-91 bps) sectors detracted from performance on an absolute basis.
On a relative basis, positive return contributions from the Consumer Discretionary (+21 bps) and Communication Services (+15 bps) sectors were offset by negative contributions from the Financials (-150 bps), Industrials (-136 bps) and Utilities (-106 bps) sectors.
We are currently overweight the Industrials, Financials and Health Care sectors, while underweight the Information Technology, Materials and Utilities sectors. Unfortunately, President Trump’s willingness to instigate a global trade war has led to a selloff in equities and greater volatility in the commodity, fixed income and currency markets worldwide. Although we are still optimistic about the back-half of 2025, chaos from the administration will keep the market on edge in the near-term. To mitigate the swings, we remain focused on high quality, dividend payers that have demonstrated the ability to consistently generate revenue and earnings growth through the business cycle.
The Ninepoint Focused Global Dividend Fund was concentrated in 28 positions as at March 31, 2025 with the top 10 holdings accounting for approximately 36.7% of the fund. Over the prior fiscal year, 17 out of our 28 holdings have announced a dividend increase, with an average hike of 33.1% (median hike of 5.8%). We will continue to apply a disciplined investment process, balancing various quality and valuation metrics, in an effort to generate solid risk-adjusted returns.
Jeffery Sayer, CFA
Ninepoint Partners