Manulife Canadian Core Equity
Mandate commentary
Q3 2025
Highlights
① Canada’s stock market generated a strong return and outpaced the majority of its global developed-market peers in the third quarter. The index return over the quarter was heavily driven by gold miners, which allowed the index to achieve a series of new all-time highs and increase its year-to-date return to more than 20%.
② Balancing geopolitical uncertainty with positive economic fundamentals.
③ Broad diversification remains the best way to handle mixed market conditions.
Mandate overview
In the quarter, the strategy underperformed its benchmark, the S&P/TSX Composite Index. Sector allocations and stock selections detracted value from relative returns. The long-term success of the strategy has been driven by striking the right balance between cyclical and secular names. However, there are periods when the market favours cyclical companies, and if that persists it can lead to elevated valuations and, in our view, greater downside risks. The strategy outperformed in challenging markets in the first and second quarters of 2025, as the on-and-off nature of tariff announcements whipsawed markets. The strategy underperformed in the third quarter, as momentum in the cyclical trade continued unabated, and some of the portfolio’s more defensive holdings lagged.
Mandate: Manulife Canadian Core Equity SMA
Performance contributors
On a sector level, the top positive contributors were an overweight position in information technology and an underweight position in utilities.
The top individual security contributors to relative performance over the quarter were the strategy’s overweight positions in an industrial equipment dealer and a commercial real estate broker and asset manager.
Performance detractors
This was offset by negative contributions from an underweight position in materials (particularly gold) and an overweight position in industrials.
The top individual detractors from performance were an underweight position in an ecommerce platform provider and an overweight position in a labelling and packaging company.
Total gross returns:
Total return | QTD | YTD | 1YR | 3YR | 5YR | SINCE INC. (FEB. 18, 2025) |
MANULIFE CANADIAN CORE EQUITY | 4.92%
| 13.40%
|
Mandate repositioning
Since the start of 2025, we have altered the portfolio’s positioning with the expectation that uncertainty and volatility would persist for some time. Earlier in the year, we reduced exposure to names that had the potential to be targeted by the U.S. administration’s tariff policies. More recently, we trimmed names whose valuations became elevated in the consumer area, real estate and telecommunications. We added to names that underperformed, including the railways, select IT names, energy exploration and production companies, pipelines, asset management, and engineering and construction.
Market overview: signs of optimism emerge, despite the noise during "Liberation Day" fallout
The third quarter delivered broad gains across asset classes, with market performance largely overriding a backdrop of cautious sentiment. Investors looked past persistent trade policy headlines, increasingly treating the U.S. administration's tariff policy as noise rather than a core risk. The primary catalysts for the positive performance were a subtle shift toward lower-interest-rate expectations and resilient corporate earnings.
Signals from the U.S. Federal Reserve of imminent rate cuts were followed by a quarter percentage cut in September. Government bond yields eased into the quarter's end, supporting bond prices, while corporate bonds outperformed government bonds.
Market outlook: solid reasons for optimism, despite ongoing uncertainty
Looking ahead, the normalization of inflation is a key development, providing central banks with the flexibility to begin an easing cycle over the next six to 12 months. This anticipated shift toward more accommodative monetary policy is expected to lower borrowing costs, creating a supportive foundation for economic activity.
This should help the macroeconomic environment sustain corporate strength. Earnings are projected to remain robust, building on a consistent trend of exceeding expectations. Resilient corporate profitability continues to be a primary driver of market performance.
The combination of impending rate cuts and durable earnings growth establishes a constructive outlook for equities. This environment reinforces the principle that focusing on underlying fundamentals, rather than reacting to short-term market volatility, is a prudent strategy for capturing future growth potential.
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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 September 30, 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.
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