Portfolio returns: Q1 2025
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (Apr 11, 2022) |
IG U.S. Taxpayer Portfolio – Global Equity F | -3.54
| 0.20
| 0.20
| 12.55
| 10.03
| |||
Quartile rankings | 2 | 2 | 2 | 1 |
IG U.S. Taxpayer Portfolio – Global Equity Series F
Portfolio commentary
Q1 2025
Highlights
① The IG U.S. Taxpayer Portfolio – Global Equity outperformed its benchmark over the quarter, net of underlying ETF fees.
② Outperformance was mainly driven by country rotation within equities, while sector positioning in U.S. equities detracted.
③ We continue to position overweight equities and underweight duration over the quarter.
Portfolio Overview
The IG U.S. Taxpayer Portfolio – Global Equity outperformed its benchmark over Q1 2025.
Within equity countries, overweight allocations to developed market Europe (Sweden, Spain, the U.K. and Germany) were additive, while an overweight allocation to Taiwan was the primary detractor. Sector positioning in U.S. equities was negative, driven by an overweight position in the industrials and consumer discretionary sectors. An overweight position in the health care sector was positive for performance.
Market overview: increased uncertainty in U.S. markets favoured international equities
Investor sentiment turned cautious in the first quarter of 2025, driven by heightened market uncertainty following significant shifts in U.S. trade policy under President Trump. Abrupt tariff changes targeting major trade partners — notably Canada, Mexico and China — increased volatility and pressured equity market performance, particularly affecting the S&P 500 Index. In contrast, European markets outperformed significantly, reflecting investors' preference for Europe's attractive valuations and perceived stronger growth potential.
Despite trade-related headwinds, global manufacturing activity showed resilience, signalling potential earnings growth ahead, provided trade tensions stabilize. Central banks diverged in response: the Bank of Canada proactively lowered its overnight rate to 2.75% to bolster growth amid trade uncertainties, while the U.S. Federal Reserve maintained its rate at 4.5%, viewing tariff-related inflation impacts as temporary.
Market outlook: tariff policy volatility and outcomes
The tariff anticipation and announcement from the White House has been the central focus for markets over the quarter, particularly in the last week. While the initial reaction to tariffs has focused on the negative implications for growth, we believe that the market is underappreciating that recent tariff announcements represent a sizeable shock to the U.S. price level and raise the risk of higher inflation, which should ultimately be negative for bonds. As such, we have recently added to fixed income underweight allocations as we believe that bonds are overpriced at current levels of yields, as well as moved underweight sectors that closely track interest rates (i.e., utilities).
The market’s attention is likely to shift towards more growth-positive fiscal policy developments abroad and in the U.S., particularly the potential for offsetting tax cuts that may amplify consumption; notably, these would further challenge long-term inflation dynamics. Structural fiscal shifts in Europe to meaningfully increase defense and infrastructure spending, as well as loosen the debt brake, are also a clear positive growth impulse for the Eurozone and globally. We have overweight positions in developed market European countries (Sweden, Switzerland and the U.K.), and have closed underweight positions in France and Germany in recent weeks.
Structurally, the shift in trade policy may pressure the U.S. assets (dollar, bonds and equities in the global cross-section) as foreign holders of U.S. assets demand higher-risk premia or begin to repatriate capital.
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