Market overview
The global equity market began the first quarter positively, as markets adjusted early to the change of government in the US. Initially the election of Donald Trump drove optimism, fuelled by Trump’s pro-business policies, particularly those affecting energy and financial companies, and investors maintained a relatively bullish sentiment towards risk assets. However, Trump’s imposition of wide-ranging tariffs on all the US’s main trade partners drove an escalation in trade tensions.
The tariffs, initially ranging from 10% to 50%, hit global markets, and prompted swift retaliation from China, the EU, Canada and elsewhere. The sell-off in equity markets was expected to slow the global economy and may even push it into a recession. The US bond market and the US dollar both reacted, with long bond yields rising and the US dollar weakening.
Meanwhile, GDP in China continues to slow amid weak consumer confidence and expectations that the Trump tariffs will impact export-oriented sectors.
Fund activity
The fund delivered a negative return but outperformed its benchmark. The positive performance during the quarter was mostly driven by asset allocation. By sector, the allocation to consumer discretionary and the underweight to consumer staples were the main contributors to performance. Real estate and healthcare dragged on performance.
Leading technology platform Alibaba benefitted from the strong performance of Chinese tech stocks during the quarter, as did BYD, one of the leading electric vehicle companies in the world. Conversely, Delta Electronics, a Taiwan-based leader in power and thermal management, struggled. The stock has been weak due to concerns around the margin profile of the business and goodwill writedowns.
In terms of fund changes, we trimmed Samsung on a weakness in the demand environment and an ongoing downgrading of earnings estimates. The company has been seeing weakness in the memory side of the business and increased operational costs. Other than a broad market ETF, there were no purchases in the quarter.
Outlook
Investors are asking whether US exceptionalism has ended, while companies are trying to determine whether they can build factories in the US and protect margins. They are likely to wait for tax incentives before breaking ground.
Countries around the world are grappling with tariff volatility. There is uncertainty as to how much is negotiable. If the US intends to use tariff revenue for tax cuts, it stands to reason that some tariffs may be longer-lasting and less negotiable.
Important information
The value of investments may fall as well as rise and investors may not get back the amount invested.
Due to the underlying assets held in the WS Canlife Asia Pacific Fund, the price of the fund is classed as having above average to high volatility.
The views expressed in this document are those of the fund manager at the time of publication and should not be taken as advice, a forecast or a recommendation to buy or sell securities. These views are subject to change at any time without notice.
This document is issued for information only by Canada Life Asset Management. This document does not constitute a direct offer to anyone, or a solicitation by anyone, to subscribe for shares or buy units in fund(s). Subscription for shares and buying units in the fund(s) must only be made on the basis of the latest Prospectus and the Key Investor Information Document (KIID) available in the literature section.
Promotion approved 25/04/25
