Portfolio returns: Q2 2025
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (Jul 12, 2013) |
IG Income – Series F | 0.98
| 1.12
| 2.37
| 9.11
| 7.14
| 3.55
| 3.78
| 4.14
|
Quartile rankings | 3 | 4 | 3 | 2 | 2 | 2 | 2 |
IG Income Portfolio Series F
Portfolio commentary
Q2 2025
Highlights
① The portfolio gained over the quarter due to positive returns on a backdrop of strong equity markets, whereas bond returns declined.
② U.S. equities, especially growth-oriented technology securities, were a major positive contributor to returns.
③ Government bond returns detracted from performance.
Portfolio Overview
The portfolio was up in the quarter.
Global equity markets rebounded strongly in Q2 2025, recovering from early volatility sparked by U.S. tariff announcements. A temporary suspension of most tariffs, along with resilient corporate earnings, helped restore investor confidence. Emerging market and U.S. equities led the rally, driven by information technology and broader growth stocks. Canadian equities also performed well, supported by strength in the materials and financials sectors. EAFE equities posted solid returns, boosted by stronger capital inflows and easing inflation. Gold prices surged to record highs, while oil declined due to weak demand. Bond markets experienced yield curve steepening, and high-yield bonds outperformed investment grade bonds. The European Central Bank and the Bank of England cut rates, while the Bank of Canada and the U.S. Federal Reserve held steady.
Equities exposure, represented by the portfolio’s 34% allocation to the Mackenzie Global Equity Income Fund, was the highest positive contributor to performance. Relative to its benchmark, the fund modestly underperformed. Returns were driven by U.S. equity stocks, primarily from the fund’s 40% allocation to the S&P 500. Growth-oriented technology securities and financial institutions contributed to the major performance gains. Security selection in the information technology and industrials sectors contributed to relative underperformance. The fund’s dividend-generating focus also produced positive returns but lagged broader markets, which adopted a risk-on stance that favoured higher-volatility stocks.
The Mackenzie Global Equity Income Fund also utilizes a stock options strategy, designed to help preserve capital during times of severe equity market stress. As expected, the options strategy detracted from returns as equity markets rallied – the opposite is expected when equity markets decline rapidly.
The Mackenzie Unconstrained Fixed Income Fund, representing 29% of the portfolio, was another positive contributor to performance. Relative to its benchmark, an underweight allocation to government bonds, an overweight allocation to corporate bonds, and security selection within industrials and financials corporate bonds added value, as did hedged foreign currency exposure.
The Mackenzie Canadian Bond Fund, representing 21% of the portfolio, was the largest detractor to performance. The fund posted a slight negative return but outperformed its benchmark. An overweight allocation to corporate bonds and security selection in government bonds were the major contributors to relative performance.
The Mackenzie Sovereign Bond Fund, representing 13% of the portfolio, was another detractor. The fund holds 10-year government bonds across the globe and was negatively impacted by rising yields, which tended to be higher at the longer end of yield curves.
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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