July - Summer Edition - CI Investments

Commentary
In addition to the above portfolios, a few comments are
warranted on Select Income Advantage Managed Corporate
Class, which saw improved performance during the quarter as
investors acknowledged the reality of a slower-than-expected
global growth and, as a result, lowered their interest rate
outlook. We do not believe interest rate risk is an immediate
threat for government bond investors as rate moves will
likely be gradual. However, inflation risk is high as real yields
available to government bond investors (net of income tax
and inflation) is now negative. The benefit of Select Income
Advantage fund is its flexible asset allocation, which most bond
funds and benchmark bond indexes do not have.
S&P 500 P/E Multiple
Based on 12 Month Forward Operating Earnings
25
20
15
10
Median: 14.2
Average: 14.3
12.6
Portfolio positioning
We believe stocks are attractive investments today due
primarily to their below-average valuations (see Chart 1).
Economic events and natural disasters tend to bring volatility
to the markets over the short term, but leave no significant
impact on long-term market performance. Volatility is part of
the investment process as market participants well know. To
best manage their investments, investors should know what
they own in their portfolio – factors such as the quality of
the companies, the portfolio’s overall concentration by sector,
country and currency, and most importantly, the price they
pay for their investment.
5
82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Source: TD Newcrest
Chart 1: With the forward P/E ratio for the S&P 500 currently at 12.6, which
is well below the average of 14.3, we feel that stocks are undervalued and
present opportunities for investors.
We have used market weakness to increase our exposure to
emerging markets and global bonds. On the other hand, we
have significantly trimmed our exposure to U.S. small cap
companies as valuations get richer.
Analysts: Yoonjai Shin, Neelam Mistry, Lewis Harkes,
Tony Mallozzi
SUMMER 2011 PERSPECTIVE AS AT JUNE 30, 2011 29