Market review
Global equity markets exhibited strong growth in the third quarter of 2025, with Chinese equities posting notable gains. This rally was fuelled by robust technology sector earnings, heightened enthusiasm for artificial intelligence (AI), resilient consumer data and substantial corporate share buybacks. Although April 2025 saw a pronounced sell-off, prompted by the introduction of new US tariffs, global equities subsequently recovered, underscoring the market’s resilience.
The US implemented sweeping tariffs as part of its ‘Liberation Day’ initiative, introducing a universal baseline tariff of 10% in April 2025, followed by a series of country-specific reciprocal levies. By August 2025, the US had significantly broadened its tariff regime, imposing duties of between 25% and 50% on key imports such as steel, aluminium, automobiles, and copper. These measures have affected a wide array of trading partners, including Canada and Mexico. While many tariffs remain in force, some have been temporarily suspended. Notably, a 90-day trade truce with China, effective until 10 November 2025, has helped to ease tensions between the two countries.
Despite ongoing challenges stemming from tariffs, Chinese equities rebounded from their lows since the second quarter of 2025, led by the financials and healthcare sectors. The market was buoyed by supportive policy measures, including interest rate cuts, reductions in reserve requirements and proactive fiscal stimulus, all of which have helped to restore investor confidence. With trade tensions easing further, there is potential for additional upside as the year progresses. Meanwhile, European equities have also performed strongly, benefiting from improved investor sentiment in response to fiscal support measures.
Fund activity
During the quarter, the fund generated a positive return and outperformed the benchmark. From a sector perspective, the strongest contributions were derived from consumer discretionary, communications and technology, although these gains were partially offset by weaker performance, particularly in industrials and health care. At the stock level, overweight positions in Alibaba and Baidu were the most significant contributors to relative performance, whilst Lululemon and Align Technology were among the main detractors.
Regarding portfolio adjustments, we initiated a position in HD Hyundai Heavy Industries, a leading Korean shipbuilder and major heavy equipment manufacturer. We also added Marvell Technology, an American firm specialising in semiconductors and related technologies, as well as a new holding in KKR.
We exited our position in Target Corp, prompted by intensifying competition within the sector and the emergence of more attractive opportunities elsewhere. Additionally, we sold our holding in Smurfit Westrock, an Irish producer of corrugated and paper-based packaging, due to declining global demand for packaging and containerboard. Given subdued consumer demand and increased economic and geopolitical uncertainties, we also exited Kerry Group.
Outlook
We anticipate that global equity markets overall will sustain their momentum, though with greater divergence across regions and sectors. Large-cap technology and AI-focused stocks are expected to continue outperforming, supported by resilient earnings and the prospect of potential Federal Reserve rate cuts. China is projected to maintain its recovery, underpinned by ongoing policy easing, improving investor sentiment, and rising interest in the domestic AI and technology sectors. Nevertheless, elevated geopolitical risks, such as tensions in the Middle East and ongoing tariff uncertainties, may give rise to bouts of volatility, which investors should monitor closely.
Important Information
Past performance is not a guide to future performance. The value of investments may fall as well as rise and investors may not get back the amount invested. Currency fluctuations can also affect performance.
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.
