Portfolio returns: Q2 2025
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (Oct 25, 2021) |
IG Climate Action Portfolio – Global Neutral Balanced F | 2.20
| 4.78
| 3.97
| 10.79
| 11.80
| 4.20
| ||
Quartile rankings | 1 | 1 | 2 | 2 | 1 |
IG Climate Action Portfolio - Global Neutral Balanced Series F
Portfolio commentary
Q2 2025
Highlights
① The portfolio appreciated during the quarter, led predominantly by strong equity performance.
② Canadian equities were the top contributor to returns, followed by EAFE equities.
③ Bond markets experienced steepening yield curves and high-yield bonds outperformed investment grade bonds.
Portfolio Overview
Global equity markets rebounded strongly in Q2 2025, recovering from early volatility sparked by U.S. tariff announcements. A temporary suspension of tariffs and resilient corporate earnings helped restore investor confidence. U.S. equities led the rally, driven by growth and information technology stocks. Canadian equities also performed well, supported by strength in the materials and financials sectors. EAFE equities posted solid gains, aided by a weaker U.S. dollar and easing inflation. Gold prices surged to record highs, while oil declined on weak demand. Bond markets experienced steepening yield curves and high-yield bonds outperformed investment grade bonds. Central banks in Europe and the U.K. cut rates, while the Bank of Canada and the U.S. Federal Reserve held steady.
Ex-North American developed market equities returned 5.9% (MSCI EAFE Index CAD), U.S. equities returned 5.1% (S&P 500 Index CAD), Canadian equities returned 8.5% (S&P/TSX Composite Index), global bonds returned 1.0% (ICE BofA Global Broad Markets Index CAD-Hedged), Canadian bonds returned -0.6% (FTSE Canada Universe Bond Index), and high-yield bonds returned 3.1% (ICE BofA U.S. High Yield Bond Index CAD-Hedged).
The IG Climate Action Portfolio – Global Neutral Balanced generated a positive return for the quarter. The Rockefeller – IG Climate Solutions Pool, the Mackenzie Betterworld Global Equity Fund and the IG Climate Action Portfolio Betterworld Canada III Fund were the largest contributors to performance. The Rockefeller – IG Climate Solutions Pool outperformed its benchmark with strong stock selections in both the industrials and health care sectors. The Mackenzie Betterworld Global Equity Fund performed in line with its benchmark where stock selection in the industrials and utilities sectors contributed most to performance. The IG Climate Action Portfolio Betterworld Canada III Fund outperformed its benchmark with stock selection in the industrials and consumer discretionary sectors contributing most to performance.
The Mackenzie Sovereign Bond Fund was a slight detractor to portfolio returns over the quarter. The fund posted a negative return as global yields were generally higher, translating into lower prices for bonds.
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: cautious on equities, strategically constructive on bonds amid trade turmoil
We remain moderately bearish on global equities. Valuations are elevated relative to macro risks, and U.S. stocks appear stretched after a strong run, with earnings revisions turning lower. International equities continue to offer a more attractive risk-return profile.
Ongoing U.S. tariffs are expected to pressure Canada’s economy and currency. A Canadian recession is increasingly likely, which would prompt the Bank of Canada to cut rates below 2% by year-end. In contrast to the U.S., which is likely to suffer from both a growth and an inflation shock, prices are not as much of a concern in Canada. The Bank of Canada has more flexibility to cut rates without fear of an inflation spike. We hold a neutral view on duration (sensitivity to interest rates), but prefer Canadian government bonds over U.S. Treasuries. Other developed market currencies (U.S. dollar, Japanese yen, euro, and pound) are preferred over the Canadian dollar.
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