Manulife Canadian Core Equity
Mandate commentary
Q3 2026
Highlights
① Canada’s stock market rallied to a series of record highs in July and August before giving up a large portion of its previous advance in September.
② Earnings growth provided a powerful tailwind for equities.
③ Inflation, energy costs pushed long-term yields higher.
Mandate overview
The portfolio outperformed its benchmark during the quarter due to positive stock selection while sector allocations moderately detracted value. From a sector level, overweight positions in industrials and consumer staples, and an underweight in materials detracted value. This was partly offset by an underweight in utilities and an overweight in information technology. Within the energy sector, the portfolio added value from stock selection with the portfolio being overweight energy producers and underweight pipelines. Oil producers disproportionately benefited, with elevated tensions in Iran driving WTI oil prices up by 30% over the quarter. Stock selection in consumer staples also added value with the portfolio being underweight a convenience store and gas station operator, and overweight a grocery store company.
Mandate: Manulife Canadian Core Equity SMA
Performance contributors
Canadian Natural Resources Limited’s rally was anchored by a rebound in oil prices, record Q2 2026 financial results and a wave of positive sector-level developments in Canadian energy infrastructure.
Agnico Eagle Mines Limited’s gains were primarily driven by a strong gold price environment and robust company-level growth prospects.
Performance detractors
Intact Financial Corporation declined 15% after reporting a material year-over-year decline in Q2 net operating income with the broader property and casualty insurance sector facing shifting reinsurance market conditions and pricing pressures.
FirstService Corporation declined almost 10% after projecting organic growth declines in roofing and lower growth, citing prolonged softness in construction and housing.
Total gross returns:
Total return (CAD) | QTD | YTD | 1YR | 3YR | 5YR | SINCE INC. (FEB. 18, 2025) |
MANULIFE CANADIAN CORE EQUITY | 2.15
| 13.67
| 19.67
| 20.83
|
Mandate positioning
During the quarter, the management team made targeted adjustments to the portfolio to reflect evolving market conditions. This included reducing exposure to financials, primarily by trimming banks and a diversified insurance and asset manager on elevated valuations. Within industrials, we used lower stock prices to add to existing positions in a business jet manufacturer, an engineering company, a global marketplace provider and a trucking and logistics company. We also sold a property and casualty insurance company due to a strong rebound in its stock price and limited upside potential. We added a new position in a financial services holding company on attractive valuations and a compelling risk-return profile. 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: earnings growth provided a powerful tailwind for equities
The third quarter showed that the current business cycle still has support, but risks have shifted. Growth held up, earnings improved and corporate investment remained firm, but higher oil prices, persistent inflation and rising long-term yields made the path forward less certain. Equities advanced as earnings provided fundamental support, even as higher rates raised the bar for further gains.
Canadian equities benefited from gains in resources and financials. Higher oil prices supported energy, while precious-metals companies were among the strongest performers. Bank earnings were supported by capital-markets activity, trading income and contained credit costs. U.S. equities also advanced, supported by strong earnings and continued technology investment. Higher yields weighed on more rate-sensitive areas.
International markets remained constructive overall, with parts of Asia benefiting from continued demand across the AI technology supply chain. Fixed income faced greater pressure as rising government bond yields outweighed coupon income, while credit remained comparatively resilient. Across markets, the central tension increasingly became earnings strength versus higher inflation and interest rates.
Market outlook: inflation, energy costs pushed long-term yields higher
With the recent earnings strength, the bar for market performance is higher. U.S. valuations are at the upper end of their historical range and have come under pressure from higher bond yields. Investor sentiment points to strong earnings growth going-forward, which could support equities in the near term, but the magnitude of gains may be muted.
The U.S. Federal Reserve and Bank of Canada each face two rate decisions this year, and persistent inflation has shifted central banks toward a tighter policy stance. Long-term yields remain a pressure point for equities, while also improving the income available from bonds.
The U.S. midterms may add to market volatility, but the path forward will be shaped by the economic cycle, inflation and interest rates.
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