Portfolio returns: Q1 2025
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (Apr 19, 2022) |
IG Mackenzie U.S. Dollar Fund – Global Fixed Income Balanced F |
-1.39
|
1.63
|
1.63
|
7.55
|
4.95
|
|||
Quartile rankings |
3 |
1 |
1 |
1 |
IG Mackenzie U.S. Dollar Fund – Global Fixed Income Balanced Series F
Portfolio commentary
Q1 2025
Highlights
① The portfolio gained over the quarter due to positive returns from fixed income and equity allocations.
② Government and corporate bonds, especially Canadian bonds, contributed to performance.
③ Energy, consumer staples and health care stocks contributed positively to returns.
Portfolio overview
The IG Mackenzie U.S. Dollar Fund – Global Fixed Income Balanced generated positive returns, benefiting from returns in fixed income markets and selective equity markets. The fund also outperformed its benchmark.
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, 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 international 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.
Within this economic and market backdrop, the fund’s global equity mandate, representing 30% of the fund, produced a positive return in local terms. The energy, consumer staples and health care sectors contributed positively to returns. Stock selection within the consumer discretionary and consumer staples sectors added value to performance. Underweight exposures to the information technology sector also benefited.
Representing a 40% fixed income allocation, the Mackenzie Core Plus Canadian Fixed Income ETF posted a positive return in local terms, benefiting from its allocation in government bonds and corporate bonds in the financials and energy sectors. Selection in the energy sector and government bonds also benefited.
The Mackenzie Core Plus Global Fixed Income ETF, which has a 30% allocation, produced a positive return as well. Government bonds and corporate bonds, especially in the energy and financials sectors, contributed positively to returns. Selection in government bonds also bolstered performance.
Additionally, the result of the fund's currency hedging policy to U.S. dollars was flat, as the U.S. dollar lost ground in Q1 2025.
Market overview: increased uncertainty in U.S. markets favoured international equities
Investor sentiment turned cautious in the first quarter of 2025, driven by heightened market uncertainty following significant shifts in U.S. trade policy under President Trump. Abrupt tariff changes targeting major trade partners — notably Canada, Mexico and China — increased volatility and pressured equity market performance, particularly affecting the S&P 500 Index. In contrast, European markets outperformed significantly, reflecting investors' preference for Europe's attractive valuations and perceived stronger growth potential.
Despite trade-related headwinds, global manufacturing activity showed resilience, signalling potential earnings growth ahead, provided trade tensions stabilize. Central banks diverged in response: the Bank of Canada proactively lowered its overnight rate to 2.75% to bolster growth amid trade uncertainties, while the U.S. Federal Reserve maintained its rate at 4.5%, viewing tariff-related inflation impacts as temporary.
Market outlook: global diversification and a balanced approach are key to navigating tariff volatility
The portfolio management team is bearish on global equities, which appear expensive relative to fundamentals. The U.S. equity market is pricier than most global markets and appears to be running out of steam. Investor sentiment has shifted against it in favour of other more attractively priced markets like international equities, which offer a more attractive risk-return trade-off. The team believes that the U.S. will maintain tariff pressure on Canada throughout the next few quarters and the Canadian dollar will likely weaken further to help the economy absorb the heavy blow of tariffs.
The portfolio management team has a neutral view on duration (sensitivity to interest rates). Trump’s economic policies – government job cuts, trade wars and general uncertainty – will weigh on economic growth. Markets are now expecting three U.S. Federal Reserve cuts this year.
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