Manulife Canadian Core Equity
Mandate commentary
Q1 2026
Highlights
① Canada’s stock market posted a small gain and comfortably outpaced its developed-market peers in the first quarter, building on its long stretch of outperformance.
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 portfolio’s positive relative performance during the quarter was primarily driven by strong security selection, particularly within the energy, industrials and financials sectors.
Mandate: Manulife Canadian core equity SMA.
Performance contributors
Effective identification of outperforming companies in these areas helped offset the negative impact of less favourable sector allocations.
Performance detractors
Sector allocation detracted from relative returns, with underweight positions in energy, materials and utilities weighing on performance.
Total gross returns:
Total return | QTD | YTD | 1YR | 3YR | 5YR | SINCE INC. (FEB. 18, 2025) |
MANULIFE CANADIAN CORE EQUITY | 4.52
| 4.52 | 26.30
| 22.03
|
Mandate repositioning
We made targeted adjustments to the portfolio to reflect evolving market conditions. This included increasing exposure to energy and industrials, and reducing information technology, financials and real estate. Within industrials, we added new positions in a data and analytics company and an engineering company, as both were negatively impacted by concerns about AI disruption risk. We believe the sell-off was overdone, as the companies have access to proprietary data and provide mission-critical services. Within information technology, we sold a software company we view as lower quality, due to its high financial leverage and operational risk. Within real estate, we sold a commercial brokerage and asset management company that has increased its exposure to engineering and construction and had an elevated valuation. These changes were implemented to align the portfolio with areas of relative strength and to manage risk as the macro environment continues to evolve.
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.
To discuss your investment strategy, speak to your IG Advisor.
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