Manulife Canadian Core Equity
Mandate commentary
Q1 2025
Highlights
① Over the quarter, both Canadian and global equity markets were heavily impacted by the Trump administration’s shifting trade policy and its potential impact on the global economy.
② Tariffs cast shadow over consumer confidence.
③ Bank of Canada and U.S. Federal Reserve monetary policies diverge.
Mandate overview
The strategy outperformed its benchmark index during the quarter. Sector allocation detracted value and stock selections added value to relative returns. On a sector level, the top positive contributors were underweight positions in health care and financials. This was offset by negative contributions from an underweight position in the materials sector and an overweight position in industrials.
Mandate: Manulife Canadian Core Equity SMA outperformed benchmark over Q1.
Performance contributors
The top individual security contributors to relative performance over the quarter were the strategy’s overweight positions in a stock exchange operator and data provider as well as a property and casualty insurance company.
Performance detractors
The top individual detractors from performance were an overweight position in a labelling and packaging company plus an underweight position in a waste management company.
Total gross returns:
Total return |
QTD |
YTD |
1YR |
3YR |
5YR |
SINCE INC. (FEB. 18, 2025) |
MANULIFE CANADIAN CORE EQUITY |
-1.12% |
Mandate repositioning
The portfolio management team purchased shares of a Canadian bank after it reported a strong quarter driven by strong capital market and wealth management revenues, prompting an increase in valuation. The portfolio management team also purchased shares of an engineering, procurement and construction services company after a short-term pullback in the stock’s price following a weak quarter of reported 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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