Market Sector Update
- Concerns about tapering the Federal
Reserve’s (Fed) Quantitative Easing (QE)
program drove volatility in the financial
markets and around the world.
September’s announcement not to taper
was justified by the need for additional
data and concerns about the political
- U.S. fiscal brinkmanship is creeping into
the market’s psyche.
- The discussion of Fed tapering produced
a substantial tightening in emerging
market (EM) financial conditions as
yields spiked and exchange rates and
equity markets retraced.
- European Central Bank (ECB) President
Draghi reiterated his forward guidance
that rates will remain at the present rate
or lower for an extended period. The
ECB also stated that it stands ready to do
more if needed.
- The Bank of Japan (BOJ) will continue
its easing policy throughout the next
quarter and into 2014. Investors are
questioning BOJ Governor Kuroda’s
proposed increase in the value-added
tax from 5% to 8% as it might threaten
to derail the economy.
- In China, we think that the government
will lower its 2014 growth target to
- We continue to seek opportunities to
reduce the volatility in the Fund.
- We are maintaining a low duration
strategy for the Fund as it allows us a
higher degree of certainty involving
those companies in which we can
- We continue to focus on maintaining
proper diversification for the Fund.
- We look for opportunities to make longterm
investments in foreign currencies
in certain emerging markets should they
weaken versus the dollar.
- Given our expectation of slow growth in
the developed world for next quarter
and into 2014, we expect short-term
interest rates to remain low overall.
Developed markets such as the United
States, Japan, and the United Kingdom
are likely to grow a little more in 2014
than they did in 2013. The Eurozone’s
growth looks to be stable at best.
- However,we believe longer Treasury
rates will be more volatile and subject
to market emotions regarding fiscal
and monetary policies. We believe the
tapering process will begin in early
2014 at best.
- We feel the Eurozone crisis is not over;
it is merely changing its shape. What
was once a banking crisis and
sovereign debt crisis now seems to be
an economic crisis as the entire region
slips into a recession. The ECB will
need to ease policy further.
- We believe the U.S. continues to be a
safe haven globally, and will continue
to attract funds from outside the U.S.
In this scenario, there will be
opportunities to make long-term
investments in foreign currencies in
certain emerging markets should they
weaken versus the dollar.
The opinions expressed in this commentary are those of the Fund’s managers and are current through Sept. 30, 2013. The managers’ views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed. Past performance is no guarantee of future results.
Risk Factors. As with any mutual fund, the value of the Fund’s shares will change, and you could lose money on your investment. An investment in the Fund is not a bank deposit and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. International investing involves additional risks including currency f uctuations, political l or economic conditions
affecting the foreign country, and differences in accounting standards and foreign regulations. Fixed-income securities are subject to interest-rate risk and, as such, the net asset value of the Fund
may fall as interest rates rise. Not all funds or fund classes may be offered at all broker/dealers. These and other risks are more fully described in the Fund’s prospectus.
Investors should consider the investment objectives, risks, charges and expenses of a fund carefully before investing. For a prospectus, or if available a summary prospectus, containing
this and other information for the Ivy Funds, call your financial advisor or visit us online at www.ivyfunds.com. Please read the prospectus or summary prospectus carefully before investing.