Portfolio returns: Q1 2025
Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (Jan 30, 2023) |
IG Graduation Portfolio F |
0.21
|
1.61
|
1.61
|
7.53
|
5.58
|
|||
Quartile rankings |
4 |
2 |
2 |
1 |
Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (Jan 30, 2023) |
IG Graduation Portfolio F |
0.21
|
1.61
|
1.61
|
7.53
|
5.58
|
|||
Quartile rankings |
4 |
2 |
2 |
1 |
The first quarter of 2025 was marked by the transition in the U.S. from the end of the Biden administration to the beginning of the Trump administration. Understandably, there was some trepidation in markets ahead of this due to months of threats around immigration policies and pending "day 1" tariffs. The new administration did not disappoint, with the president signing more Executive Orders in his first one hundred days than any president in history. Most concerning for markets is the threat of tariffs and what that can lead to – inflation, economic slowdown, dysfunctional supply chains and unemployment. Of course, most concerning to us is the threat of tariffs on Canada. In the end the threat was largely toothless, with 25% tariffs being implemented not once but twice and then immediately paused. This left the threat of future tariffs hanging over Canada and the world, and that type of news flow and uncertainty is not without consequences with investors getting cautious on risk – both equities and corporate bonds – in favour of government bonds.
In Canada, yields on 2-year, 5-year, 10-year and 30-year government bonds fell 47bps, 35bps, 26bps and 11bps respectively, significantly bull-steepening the curve. Similarly in the U.S., these same tenors fell 36bps, 43bps, 36bps and 21bps. In terms of credit, the U.S. CDX Investment Grade Index – which had stubbornly refused to widen despite Trump’s electoral success and threats of disruption – finally gave up, widening from sub-50 to over 60.
The FTSE Canada Short Term Bond Index achieved positive returns for the quarter.
The portfolio's performance was positively influenced by its allocation to investment-grade corporate bonds. Notably, corporate bonds in the financials and energy sectors drove gains during this period. However, exposure to government bonds had a negative impact on performance.
The fund ended the period with an overweight allocation to corporate bonds at 62.5% and an underweight allocation to government bonds at 32.7%. During the period, the fund increased its allocation to the energy sector and decreased its allocation to the financials and communication services sectors.
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.
The outlook can only be described as uncertain. The U.S. administration has suggested various reasons for tariffs – border security, reciprocity, to correct trade imbalances – and so what will actually be implemented and how they can be mitigated remains unclear. Risk appetite therefore remains low generally in the market and volatility remains high. Overall, the market remains fragile, and a fragile market can lead to pockets of illiquidity.
We remain cautious of what is currently unclear and continue to consider multiple possible future paths. In particular, should tariffs be implemented and should this be the beginning of either a short-term or longer-term trade war, what will the outcome be for inflation. While tariffs are generally thought to be inflationary – at least in the short term – will the over-riding reaction be demand destruction and a global slowdown? Q2 2025 promises to be equally interesting.
Commissions, fees and expenses may be associated with mutual fund investments. Read the prospectus and speak to an IG Advisor before investing. The rate of return is the historical annual compounded total return as of March 31, 2025, including changes in value and reinvestment of all dividends or distributions. It does not take into account sales, redemption, distribution, optional charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, values change frequently, and past performance may not be repeated. Mutual funds and investment products and services are offered through Investors Group Financial Services Inc. (in Québec, a Financial Services firm). Any additional investment products and brokerage services are offered through Investors Group Securities Inc. (in Québec, a firm in Financial Planning). Investors Group Securities Inc. is a member of the Canadian Investor Protection Fund.
This commentary may contain forward-looking information which reflects our or third-party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and do not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of March 31, 2025. There should be no expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.
This commentary is published by IG Wealth Management. It represents the views of our Portfolio Managers and is provided as a general source of information. It is not intended to provide investment advice or as an endorsement of any investment. Some of the securities mentioned may be owned by IG Wealth Management or its mutual funds, or by portfolios managed by our external advisors. Every effort has been made to ensure that the material contained in the commentary is accurate at the time of publication, however, IG Wealth Management cannot guarantee the accuracy or the completeness of such material and accepts no responsibility for any loss arising from any use of or reliance on the information contained herein.
Trademarks, including IG Wealth Management and IG Private Wealth Management, are owned by IGM Financial Inc. and licensed to subsidiary corporations.
© Investors Group Inc. 2025