Portfolio returns: Q2 2025
| Total Return | 1M | 3M | YTD | 1YR | 3YR | 5YR | 10YR | Since Inc. (October 30, 2023) |
Canadian Neutral Balanced Series I | 1.36
| 2.81
| 4.25
| 12.70
| 16.03
| |||
Quartile rankings | 3 | 3 | 3 | 3 |
iProfile™ Enhanced Monthly Income Portfolio – Canadian Neutral Balanced Series I
Portfolio commentary
Q2 2025
Highlights
① The portfolio gained over the quarter due to positive returns from its equity allocations.
② U.S. and Canadian equities were the topmost contributors.
③ Canadian bonds dragged down returns.
Portfolio Overview
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.
The iProfile™ Enhanced Monthly Income Portfolio – Canadian Neutral Balanced, Series I, was up in the quarter. All its underlying pools produced positive returns except the Mackenzie – IG Canadian Bond Pool.
The iProfile Canadian Dividend and Income Equity Private Pool – with an allocation of 35.0% – was the highest contributor. The pool posted positive returns, though it underperformed its benchmark with stock selection in the financials and energy sectors being the major detractors in relative performance. Financials sector returns contributed the most to its positive performance.
With an allocation of 14%, the iProfile U.S. Equity Private Pool was another contributor in the portfolio. The pool posted positive returns, though it underperformed its benchmark with stock selection in the financials and health care sectors being the major detractors in relative performance. The pool posted positive returns, benefiting from the information technology stocks.
The Mackenzie – IG Canadian Bond Pool, the heaviest weighted pool in the portfolio at 39%, was the only detractor. The pool posted a slight negative return but outperformed its benchmark. Government bond selection and an overweight allocation to corporate bonds bolstered performance.
The iProfile International Equity Private Pool, with an allocation of 8.0%, was another positive contributor. The pool outperformed its benchmark with stock selection in the materials and industrials sectors 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. However, the pool managed to outperform its benchmark primarily through an overweight allocation and security selection in the financials sector. Stock selection in the industrials and energy sectors detracted from performance.
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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