Portfolio returns: Q1 2025
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (October 30, 2023) |
Canadian Neutral Balanced Series F |
-1.48
|
1.30
|
1.30
|
9.81
|
16.34
|
|||
Quartile rankings |
3 |
2 |
2 |
2 |
iProfile™ Enhanced Monthly Income Portfolio – Canadian Neutral Balanced Series F
Portfolio commentary
Q1 2025
Highlights
① The portfolio gained over the quarter due to positive returns from fixed income allocations.
② Canadian bonds and non-U.S. equities were the topmost contributors.
③ U.S. equities dragged down returns.
Portfolio overview
In the first quarter of 2025, global financial markets experienced notable shifts in regional equity performance. Contrary to investors’ original expectations of continued U.S. market dominance, EAFE equities were among the best performers while U.S. equities were among the weakest as investors rotated away from the U.S. U.S. trade policy was a key cause of concern for investors, resulting in the outflow of capital from U.S. equities, a flight towards safer assets, and a hostile global trade environment that threatens global economic growth. Value stocks led over growth stocks and gold prices skyrocketed over the period, benefiting Canadian equity markets. Global bond prices appreciated as yields declined, particularly in the U.S. Canadian bonds performed well, supported by the Bank of Canada’s rate cuts over the quarter.
The iProfile™ Enhanced Monthly Income Portfolio – Canadian Neutral Balanced, Series F, was up in the quarter. All its underlying funds produced positive returns except the iProfile U.S. Equity Private Pool.
The iProfile Canadian Dividend and Income Equity Private Pool, with an allocation of 35%, was the topmost contributor. The fund benefited from strong financials and energy sector returns. Stock selection in health care and utilities and an underweight position in the information technology sector contributed to performance.
The Mackenzie – IG Canadian Bond Pool, the heaviest weighted fund in the portfolio at 39%, was the second-highest contributor. The fund produced a slight positive return and outperformed its benchmark. Government bond selection and an overweight allocation to corporate bonds bolstered performance. The fund benefited from U.S. bond futures as bond yields fell.
The iProfile International Equity Private Pool, with an allocation of 8.0%, was another positive contributor. The fund outperformed its benchmark with stock selection in consumer staples and industrials being the major contributors.
The iProfile U.S. Equity Private Pool was the only detractor in the portfolio, following the path of negative returning U.S. equity markets. The pool benefited from an overweight allocation and security selection in the financials sector. Stock selection in the industrials and energy sectors detracted from 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: global diversification and a balanced approach are key to navigating tariff volatility
The portfolio management team is bearish on global equities, which appear expensive relative to fundamentals. The U.S. equity market is pricier than most global markets and appears to be running out of steam. Investor sentiment has shifted against it in favour of other more attractively priced markets, like international equities, which offer a more attractive risk-return trade-off. The team believes that the U.S. will maintain tariff pressure on Canada throughout the next few quarters and the Canadian dollar will likely weaken further to help the economy absorb the heavy blow of tariffs.
The portfolio management team has a neutral view on duration (sensitivity to interest rates). Trump’s economic policies – government job cuts, trade wars and general uncertainty – will weigh on economic growth. Markets are now expecting three U.S. Federal Reserve cuts this year.
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