Ivy Accumulative Fund

Ivy Accumulative Fund
03.31.19

Market Sector Update

  • After one of the worst quarters in recent memory to end 2018, equities had one of their best quarters in nearly a decade.
  • One obvious question is what caused such a turnaround in a matter of weeks. Primarily, the sudden reversal on interest rates by the Federal Reserve (Fed) and its chairman, Jerome Powell, which came in January. Market expectations swung from a belief that multiple rate hikes were in the cards for 2019 to the possibility the Fed would cut interest rates. For equities, this knocked down a major headwind that monetary policy would end the current economic expansion. It also sent interest rates lower with the 10-year Treasury yield falling 28 basis points in the quarter, adding further support for longer-duration growth stocks and dividend payers.
  • Another factor in the market turnaround was reported progress on a U.S.-China trade deal. Any deal between the world’s two largest economies would help lessen uncertainty around capital spending decisions by companies would be viewed favorably by the equity markets. While progress on an agreement remains fuzzy at this time, expectations about a possible deal in the near term could buoy economic expectations later this year.

Portfolio Strategy

  • The Fund had a positive return for the quarter and slightly outperformed its benchmark (based on Class I shares).
  • Outperformance was driven by stock selection across most sectors, with the leading contributors being holdings from the health care and information technology sectors.
  • The Fund's top three sectors contributing to performance were health care, information technology and consumer staples. Converserly, communication services, industrials and energy were the largest sector detractors. An overweight to cash also was a drag to performance for the period.

Outlook

  • While the past two quarters have served notice to the difficulty in anticipating short-term moves, we believe the market could take a breath until the details of a potential U.S.-China trade agreement materialize.
  • In addition, the market is awaiting the first-quarter earnings reports, which could include material weakness in more cyclical areas. While the past three months focused on removing end of the cycle risks, we anticipate company earnings results playing a more significant role in driving stock prices.
  • Our efforts remain focused on researching individual companies of all sizes that we believe are well positioned to disrupt their markets while exceeding market averages on profitability. We continuously monitor a list of target companies to assess their potential for delivering above market returns over a three- to five-year basis, not just in the short term.
  • This elevated level of market uncertainty has provided numerous opportunities in many high-quality growth companies and we are actively seeking to take advantage of these price dislocations to best position the Fund for the future.

The opinions expressed are those of the Fund’s manager and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through March 31, 2019, are subject to change at any time based on market and other current conditions, and no forecasts can be guaranteed. This commentary is being provided as a general source of information and is not intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy. Investment decisions should always be made based on an investor’s specific objectives, financial needs, risk tolerance and time horizon. Past performance is not a guarantee of future results.

The S&P 500 Index is a float-adjusted market capitalization weighted index that measures the large-capitalization U.S. equity market. It is not possible to invest directly in an index.

The Russell 3000 Growth Index measures the performance of the largest 3,000 U.S. companies representing approximately 98% of the investable U.S. equity market. It is not possible to invest directly in an index.

Effective Feb. 21, 2019, the Fund's benchmark changed from the S&P 500 Index to the Russell 3000 Growth Index.

Barry M. Ogden, CFA, CPA, served as a portfolio manager on the Fund until Dec. 3, 2018.

Risk factors: 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. These and other risks are more fully described in the Fund’s prospectus. Before investing, investors should consider carefully the investment objectives, risks, charges and expenses of a mutual fund. This and other important information is contained in the prospectus and summary prospectus, which may be obtained at www.waddell.com or from a financial advisor. Read it carefully before investing.