Capital Group Global Developed Equity
Mandate commentary
Q1 2025
Highlights
① In a quarter where market volatility rose and global equities’ returns were negative, the mandate’s results outpaced its benchmark, the MSCI World Index. Both strong stock selection and positioning across sectors contributed to results during the quarter.
② Tariffs cast shadow over consumer confidence.
③ Bank of Canada and U.S. Federal Reserve monetary policies diverge.
Mandate overview
The mandate aims to build the portfolio on a company by company basis and generally does not aim to forecast macroeconomic trends. Today, despite increased market volatility from an evolving macroeconomic and political environment, the portfolio management team remains constructive on the ability of certain high-quality companies around the globe to provide attractive returns and resilience over the medium and long term. The portfolio management team will continue to patiently adjust the portfolio on a company by company level and feels the portfolio’s overall posture reflects its dual investment objectives.
Mandate: U.S. and international equities diverged.
Performance contributors
On a sector basis, consumer staples was tied with information technology as the largest contributor to relative results during the quarter. Consumer staples holdings in tobacco and beverages companies contributed, as did a heavier footprint in food products.
The portfolio’s focus on aerospace and defense companies was a particular area of strength as Safran and Rolls-Royce (among others) were top contributors.
Performance detractors
The information technology sector also included the two largest individual detractors during the quarter: Broadcom and Taiwan Semiconductor Manufacturing Company (TSMC). Broadcom saw shares sell off on worries over the outlook for artificial intelligence (AI) spending after Chinese startup DeepSeek released an impressive AI model. The company also struggled with tariff-related concerns. TSMC saw shares fall after it warned that first-quarter revenue would be at the lower end of its guidance range; sentiment was also hurt by worries over the impact of new trade tariffs and U.S.-China export controls.
Total gross returns:
Total return |
QTD |
YTD |
1YR |
3YR |
5YR |
SINCE INC. (FEB. 18, 2025) |
CAPITAL GROUP GLOBAL DEVELOPED EQUITY |
-4.74%
|
Mandate repositioning
Regionally, the portfolio management team seeks companies that can deliver attractive long-term opportunities, regardless of their countries of domicile. The U.S. represents the largest country in the portfolio but is positioned with a lighter relative emphasis of 50.1% versus the index at 72.0%. From a country perspective, positioning and stock selection in the U.S., France and U.K. contributed positively to results.
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: U.S. tariff concerns may temper earning expectations.
Looking ahead, we remain optimistic, despite recent market volatility and lingering uncertainties. While U.S. equities have faced challenges, including a pullback from February highs and sensitivity to tariff concerns, other regions, such as Canada, Europe and emerging markets, offer compelling opportunities. These regions have shown resilience, supported by stronger fundamentals and more attractive valuations compared to U.S. markets. As long as unemployment remains low, consumption is expected to continue at a steady pace, supporting economic growth. Despite short-term turbulence, global opportunities continue to emerge, and maintaining a long-term perspective will be key to navigating this market volatility.
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