Capital Group Global Developed Equity
Mandate commentary
Q1 2026
Highlights
① Global stocks declined, due to Middle East tensions, inflation fears, energy supply disruptions and slowing economic growth, with the MSCI ACWI down 3%.
② The oil shock drove turbulence, as commodities dominated inflation fears.
③ Global growth expectations will be adjusted if conflict extends beyond summer.
Mandate overview
The mandate lagged the MSCI World Index. While sector allocation was additive, weak stock selection and negative portfolio interaction effects drove overall underperformance.
Mandate: defensive amid market volatility
Performance contributors
Information technology contributed positively to relative returns, driven by stock selection. ASML rallied on record fourth-quarter 2025 orders and increasing optimism around its outlook, while Taiwan Semiconductor Manufacturing Company (TSMC) rose on well-received results, continuing to benefit from accelerating AI-related demand.
Utilities contributed to relative results, supported by both a larger relative footprint and strong stock selection. Within the sector, RWE shares gained on improving sentiment around its outlook, driven by rising demand for electricity to power AI data centres.
Consumer discretionary contributed to relative performance, driven by the portfolio’s underweight position in the sector. Not owning Tesla proved beneficial, as shares fell on declining EV sales and fourth-quarter 2025 deliveries that fell short of analyst expectations.
Performance detractors
Underweighting in energy contributed to overall underperformance most, reflecting the portfolio’s smaller relative footprint in the highest returning sector during the quarter. Namely, not holding ExxonMobil dragged on performance, as it experienced strong positive returns amid surging oil prices.
Health care detracted from relative returns as well, driven by weak stock selection, particularly in pharmaceuticals. Among the top detractors, Novo Nordisk shares slumped after it forecast a drop in sales and operating profit for 2026, and reported disappointing results from clinical trials for its next-generation weight-loss treatment, CagriSema.
Total gross returns:
Total return | QTD | YTD | 1YR | 3YR | 5YR | SINCE INC. (FEB. 18, 2025) |
CAPITAL GROUP GLOBAL DEVELOPED EQUITY | -3.93 | -3.93 | 18.64 | 11.65 |
Mandate repositioning
Information technology now represents the largest sector allocation, moving to a slight overweight through purchases of NVIDIA, Microsoft and Tokyo Electron. Semiconductors remain a key focus, with global holdings including Broadcom, TSMC and ASML.
Industrials continues to remain among the largest sectors on an absolute basis and remains the largest relative to the benchmark, emphasizing aerospace and defence companies, such as GE Aerospace, Safran and Rolls-Royce.
Financials is the remaining sector with exposure larger than 10%. JPMorgan Chase and DBS Group represent the portfolio’s top 20 holdings, yet the portfolio’s exposure to banks is under-represented relative to the benchmark. Only the insurance industry represents an emphasis.
Health care has been trimmed to an underweight position at approximately 8%. The sector saw some net purchasing during the quarter.
Market overview: oil shock drove turbulence, commodities dominated inflation fears
The first quarter of 2026 began with supportive economic momentum; improving manufacturing, a stabilizing U.S. housing backdrop and contained inflation. However, this quickly pivoted as the conflict in the Middle-East involving Iran — along with trade disruption around the Strait of Hormuz — pushed energy commodities higher. The energy shock drove volatility across global equities, yet the underlying backdrop proved more resilient than headlines implied, reinforcing the value of diversification.
Canadian equities were resilient, as higher crude oil prices supported the energy sector and helped offset weaknesses in rate-sensitive areas. Defensive sectors, dividends and real-asset exposure provided additional insulation versus many global peers. U.S. fundamentals remained solid, but sentiment weakened as oil lifted inflation expectations. Investors rotated away from expensive, rate-sensitive growth stocks, making performance more about a valuation reset than deteriorating earnings.
Market outlook: global growth expectations will be adjusted if conflict extends beyond summer
Looking ahead, oil and energy prices remain the central swing factor. A credible path to de-escalation could shift attention back to the positive economic cycle evident early in the quarter; a prolonged disruption would maintain inflation uncertainty and elevated volatility.
In this environment, commodity producers and value‑oriented equities may provide resilience, while long‑duration assets and oil‑importing regions face greater sensitivity to energy-price fluctuations.
Diversification and flexibility remain central to portfolio construction
Canadian equities offer exposure to energy and materials supported by global supply constraints. International developed and emerging markets present valuation‑driven opportunities and help diversify away from concentrated U.S. equity exposure.
Within fixed income, short‑ to intermediate-duration strategies can balance yield and interest‑rate risk, complemented by high‑quality corporate bonds for disciplined income generation. Key areas to watch will be central bank policies, as they look at the impact of higher energy costs and their indirect tax on the consumer.
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