In the first quarter of 2025, global financial markets experienced notable shifts in regional equity performance. Contrary to investors’ original expectations of continued U.S. market dominance, EAFE equities were among the best performers while U.S. equities were among the weakest as investors rotated away from the U.S. U.S. trade policy was a key cause of concern for investors, resulting in the outflow of capital from U.S. equities, a flight towards safer assets, and a hostile global trade environment that threatens global economic growth. Value stocks led over growth stocks and gold prices skyrocketed over the period, benefiting Canadian equity markets. Global bond prices appreciated as yields declined, particularly in the U.S. Canadian bonds performed well, supported by the Bank of Canada’s rate cuts over the quarter.
The IG Growth Portfolio – Canadian Balanced generated a positive return this quarter. The portfolio’s equity allocation was the leading contributor to portfolio returns, followed by fixed income.
The Mack EAFE Equity Pool, the Mackenzie – IG Canadian Bond Pool, and the Mack Canadian Equity Pool were the leading contributors. The Mack EAFE Equity Pool was a strong performer, benefiting from its allocation to European equities. Underweight allocations to Japan and security selection in France contributed to relative performance. A slight detractor to returns was the pool's overweight allocation to Australia. The Mackenzie – IG Canadian Bond Pool benefited from strong performance in government bonds. Duration management of government bonds was the largest detractor on a relative basis, while corporate bond selection was the largest contributor. The Mack Canadian Equity Pool generated a positive return due to strong contributions from the materials sector, but modestly underperformed its benchmark due primarily to security selection in the same sector. Security selection in the energy sector was the largest contributor to performance.
The Mackenzie IG U.S. Equity Pool and the Mackenzie Broad Risk Premia Fund were the leading detractors. The Mackenzie IG U.S. Equity Pool was led lower by stocks in the information technology and consumer discretionary sectors. Security selection in the health care and industrials sectors was a drag on relative performance. The pool's underweight allocation to the information technology sector was a leading contributor to relative returns. The Mackenzie Broad Risk Premia Collection Fund, an alternative strategy fund that combines equity exposure with multiple alternative strategies in a captial efficient manner, detracted from returns as global equities broadly declined.