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 and gold prices skyrocketed over the period, benefiting Canadian equity markets. Low volatility stocks outperformed the broader market as defensive sectors gained on information technology sector struggles. 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 Low Volatility Portfolio – Balanced generated a positive return this quarter on the backdrop of strong non-U.S. equity and fixed income returns.
The IG Mackenzie European Equity Fund, the Mackenzie – IG Low Volatility Canadian Equity Pool and the Mackenzie Canadian Dividend Fund were the largest contributors to performance. The IG Mackenzie European Equity Fund was the highest-returning fund, led by financials. Stock selection in the financials and health care stocks added value while selection in materials and industrials detracted, relative to the benchmark. The Mackenzie – IG Low Volatility Canadian Equity Pool, the largest weighted fund in the portfolio, benefited from strong returns from the materials and financials sectors. Stock selection in the industrials and energy sectors was the largest drag on relative performance. The Mackenzie Canadian Dividend Fund, the third-highest contributor, outperformed its benchmark. Stock selection in the financials and energy sectors and an underweight allocation to the information technology sector added significant value.
All our fixed income funds generated a positive return. The top contributors were long-duration bond holdings that included the iShares 20+ Year Treasury Bond ETF and the Mackenzie US Government Long Bond Index ETF, which benefited substantially from the effects of falling yields and economic growth concerns.
The Putnam – IG U.S. Growth Pool was a major detractor to returns, as growth stocks underperformed, especially in the U.S. market. The fund modestly underperformed its benchmark due to security selection in information technology and consumer staples stocks. Allocation to the SPDR S&P 500 ETF Trust was another detractor to performance.