IG Core Portfolio – Global Income Series F

Portfolio commentary
Q2 2025

Highlights

① The portfolio posted gains in Q2 2025 as global markets demonstrated resilience amid heightened uncertainty surrounding U.S. trade policy and escalating geopolitical tensions.

② Global bond exposure contributed most to portfolio performance.

③ Long-end bond yields ended the period higher in North America, reflecting a steepening of the yield curve.

Portfolio returns: Q2 2025

Total Return1M3MYTD1YR3YR5YR10YRSince Inc.
July 16, 2014

IG Core Portfolio – Global Income F

0.94

0.71

1.48

4.63

4.08

1.47

2.54

2.73

Quartile rankings

4

3

4

4

4

3

3

 

Portfolio Overview


The second quarter of 2025 opened with markets leaning into the disinflation narrative and the prospect of global rate cuts. But that momentum proved fragile. Sticky core inflation, mixed data, and geopolitical noise kept central banks on the sidelines and left rate curves more reactive than directional.

In fixed income, inflation breakeven spreads widened and term premiums were volatile as markets digested a collision of geopolitical volatility and macro recalibration. The 10-year U.S. Treasury yield moved in a wide 60bps range during the quarter, peaking around 4.60% in mid-May before catching a duration bid in the back-half of the quarter. The 2-year yield dipped below 3.50% after “Liberation Day”, rebounding toward 4.00% and then 3.75% by quarter-end. A growing sense that the U.S. Federal Reserve would need to cut rates sooner rather than later helped support the front end into June.

In Canada, the macro narrative continued to diverge. The Bank of Canada’s April 16 Monetary Policy Report presented scenario analysis around ongoing tariff uncertainty, while reiterating downside growth risks in worst-case trade outcomes. The Bank of Canada continued to stress household debt sensitivity and cumulative tightening effects, but held its policy rate steady in both April and June.

Canadian yields declined across the curve, particularly in the front end. The 2-year yield fell to 2.25% early in the quarter before rebounding toward 2.60%, while 10-year yields ended around 3.25%. The Canada-U.S. 10-year spread narrowed, moving from -125bps at the start of the quarter to approximately -95bps by the end, in line with our long-held view of spread narrowing. Both curves steepened over Q2 2025, but rising issuance expectations in Canada meant a long-end underperformance.

The Mackenzie IG Global Bond Pool is the largest weighted allocation in the portfolio and the largest contributor to performance. Global bonds posted positive returns during the period, benefiting from a weaker USD and a growing expectation of rate cuts. 

The Mackenzie North American Corporate Bond Fund is the fifth-largest weighted allocation in the portfolio and a positive contributor to performance. The fund posted positive returns during the period as credit markets rebounded off initial “Liberation Day” tariff concerns. 

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 overview: volatility gripped global markets during "Liberation Day" fallout

Market outlook: a gradual shift away from tariffs and fiscal themes  

Looking ahead to Q3 2025, we expect markets to gradually shift away from tariffs and fiscal themes as dominant drivers. The primary focus is likely to return to U.S. Federal Reserve policy. Powell has been vocal in forecasting inflation pass-through from tariffs, but if it fails to materialize in the June and July data, the U.S. Federal Reserve could find itself behind the curve by mid-August. Markets are already starting to price additional cuts, and sooner. Steepeners are favoured in that scenario, with the front end expected to do much of the heavy lifting, but we continue to like U.S. duration in the 10-year space into H2 as we think the whole curve could be affected and we do not anticipate major changes in U.S. fiscal policy. 

To discuss your investment strategy, speak to your IG Advisor.