Manulife North American Dividend Income
Mandate commentary
Q2 2025
Highlights
① An underweight allocation to specific information technology companies detracted from performance over the quarter and minimized the impact of superior sector allocation.
② Equities staged a sharp V-shaped recovery after tariff reversal.
③ Investors look ahead to trade-policy clarity.
Mandate overview
The portfolio’s core emphasis on business risk diversification resulted in underperformance of the quarter, as a significant portion of the benchmark index’s returns were derived from a handful of companies (for example, NVIDIA, Broadcom, Shopify). The benchmark index had double the allocation to these companies, which added to performance but also increased the risk characteristics. The portfolio offered exposure to these names but maintained lower beta and volatility metrics relative to the benchmark index over the period.
Performance for the quarter came from a variety of contributors. In the information technology sector, software and equipment holdings drove returns. Similarly, in the financials sector, strong stock selection in banks contributed to performance.
Mandate: Underperformed benchmark over Q2
Performance contributors
Amphenol Corporation: The company delivered strong performance, supported by rising demand in the defense and aerospace sectors. Strategic acquisitions further expanded its presence in communications and medical markets, reinforcing its long-term growth outlook and analyst confidence.|
Uber Technologies, Inc.: The company benefited from strong demand in its core ride-sharing business and improved profitability in its delivery segment. Growing investor optimism around its partnerships in autonomous vehicle technology also supported performance.
Performance detractors
Thermo Fisher Scientific Inc.: The company lowered its profit outlook due to tariff-related pressures and proposed cuts to U.S. research funding, creating uncertainty around future growth and weighing on investor sentiment.
Becton, Dickinson and Company: The company reported weaker-than-expected quarterly revenue, driven by declines in its Life Sciences and Interventional segments. Tariff headwinds and constrained research funding also contributed to underperformance.
Total gross returns:
Total return | QTD | YTD | 1YR | 3YR | 5YR | SINCE INC. (FEB. 18 2025) |
MANULIFE NORTH AMERICAN DIVIDEND INCOME | 3.36%
| -0.17%
|
Mandate repositioning
The portfolio management team generally took profits in select companies where upside and/or business value creation characteristics changed. The portfolio management team reduced exposure to the health care sector, exiting positions in specific life sciences and equipment companies. Conversely, the portfolio management team added exposure to the information technology sector in semiconductor and software companies. The portfolio management team believes that the portfolios are well-positioned to deliver absolute returns and provide uncorrelated business risk diversification.
Market overview: volatility gripped global markets during "Liberation Day" fallout
The second quarter of 2025 served as a stark lesson in the market’s ability to absorb sharp, politically driven shocks. The period was dominated by the U.S. administration's chaotic trade policy, beginning with the April announcement of sweeping tariffs, which sent global equities into a tailspin. The S&P 500 Index plunged into correction territory, marking its most significant retreat since March 2020.
This initial panic sent investors fleeing to safe havens, a move clearly reflected in the 5.7% surge in gold prices this quarter. However, the administration’s subsequent and rapid reversal of the policy triggered an equally dramatic V-shaped recovery. The initial fear that gripped the market evaporated, and major equity indices charged back into positive territory
Throughout this turbulence, central banks remained on the sidelines. The U.S. Federal Reserve (the Fed) and the Bank of Canada (BoC) held rates steady, caught between the inflationary threat of tariffs and the risk of a corresponding economic slowdown.
Market outlook: solid reasons for optimism, despite ongoing uncertainty
The world is rarely free of turmoil. Over the past five years, the world economy has faced a global pandemic, multi-decade inflation highs, aggressive interest rate hikes and significant international conflicts. Yet, despite these challenges, markets have demonstrated resilience as businesses adapt, consumers adjust, and economies discover new pathways to growth.
Looking ahead, trade policy clarity and its influence on corporate earnings will be key drivers of market sentiment. Attractive equity valuations and the potential for mid-teens earnings growth provide reasons for optimism, though uncertainty around policy and geopolitical risks remains a headwind. Central banks are expected to shift toward more accommodative monetary policy, with rate cuts anticipated in some regions. This could support economic growth while stabilizing markets, particularly in fixed income.
Persistent volatility may weigh on sentiment in the near term, especially in areas more exposed to trade tensions. However, as these risks moderate, the outlook should improve, with opportunities emerging in sectors poised to benefit from easing uncertainty. It’s important to remember that volatility, while challenging, can also create opportunities.
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