July 31, 2025
Commentary
Monthly Update
Ninepoint Focused Global Dividend Fund - Compounded Returns¹ As of July 31, 2025 (Series F NPP964) | Inception Date: November 25, 2015
1M |
YTD |
3M |
6M |
1YR |
3YR |
5YR |
Inception |
|
|---|---|---|---|---|---|---|---|---|
Fund |
4.35% |
3.73% |
14.53% |
-0.37% |
15.64% |
17.13% |
12.07% |
9.67% |
S&P Global 1200 TR (CAD) |
2.61% |
7.16% |
12.21% |
3.01% |
16.02% |
19.21% |
14.91% |
12.34% |
Markets continue to climb a wall of worry, as fears of a post-liberation day worst-case scenario have yet to play out. Thus far, most industries and companies (barring a few notable exceptions such as automotive manufacturers) have been able to rely on selling current inventory and sharing the cost of tariffs with downstream suppliers to protect profit margins and earnings as best as possible. Importantly, the AI-trade is alive and well, with the key cloud hyperscalers and those responsible for the technology infrastructure buildout continuing to outperform, supporting the equity markets at the index level.
As we write this commentary, with 90% of the S&P 500 companies having reported actual results, 81% of companies reported a positive revenue surprise and (perhaps coincidentally) 81% of companies reported a positive EPS surprise. Heading into the earnings season, consensus estimates only called for 4.9% EPS growth, so the bar was set quite low. However, the blended year-over-year earnings growth rate is coming in at 11.8%, well above these initial expectations. Given the investment themes that we have discussed in the past, it is no surprise that the Communication Services, Information Technology, and Financials sectors have reported the biggest EPS growth numbers. But as the equity indexes push relentlessly higher, we are mindful that the forward 12-month P/E ratio for the S&P 500 is approximately 22.1x, above the 5-year average (19.9x) and above the 10-year average (18.5x), all according to FactSet.
Looking forward, deregulation, tax reform and fiscal stimulus are potential tailwinds, with President Trump’s “Mega Bill” signed into law on July 4th. Further, calls for interest rate cuts from President Trump have grown louder and louder and, despite the Fed remaining on hold at its July meeting, two members of the Federal Reserve’s Open Market Committee dissented on holding interest rates steady, voting to lower rates instead. Interestingly, the subsequent Non-Farm Payrolls report was surprisingly weak, with only 73,000 jobs added in July (below expectations of 110,000 jobs) and prior period revisions were shockingly bad, with May jobs data revised from +144,000 to +19,000 and June jobs data revised from +147,000 to just +14,000. Looking at the initial jobless claims and continued claims data, it appears that we are in a “no-fire but no-hire” jobs market, where employers are reluctant to fire employees, but if they do, job seekers are having a very difficult time finding work.
With the weak jobs report, the forward curve is currently implying a 90% chance of a 25 basis points cut in September and a 100% of at least two 25 basis points cuts by the end of the year. We really hope that the rate cuts come in time to protect the job market from any further deterioration, especially since consumers from lower-income households seem to be under some pressure. In this environment, we have reduced outsized allocations to individual stocks and investment themes while remaining invested in a broadly diversified portfolio, in case a growth scare materializes over the next few months.
Top contributors to the year-to-date performance of the Ninepoint Focused Global Dividend Fund by sector included Information Technology (+274 basis points), Industrials (+203 basis points) and Communication Services (+84 basis points), while the Health Care (-103 basis points) Utilities (-91 basis points) and Consumer Discretionary (-3 basis points) sectors detracted from performance on an absolute basis.
On a relative basis, positive return contributions from the Industrials (+61 basis points), Information Technology (+38 basis points) and Consumer Discretionary (+36 basis points) sectors were offset by negative contributions from the Financials (-167 basis points), Utilities (-130 basis points) and Health Care (-61 basis points) sectors.
We are currently overweight the Industrials, Information Technology and Financials sectors, while underweight the Materials, Health Care and Utilities sectors. As the market continues to recover from its April lows, we are closely watching incoming data for any evidence that the Trump administration’s policies have damaged the labour market and/or future economic growth. To mitigate the risks, 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 30 positions as at July 31, 2025, with the top 10 holdings accounting for approximately 37.2% of the fund. Over the prior fiscal year, 23 out of our 30 holdings have announced a dividend increase, with an average hike of 37.6% (median hike of 9.6%). 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