The John Hancock Fundamental Large Cap Core Fund experienced a period of varied returns during the second quarter of 2025. While the fund delivered an 8.35% return, it fell short of its benchmark, the S&P 500 Index, which recorded a more robust 10.94% gain. This performance differential was largely influenced by strategic allocation decisions within the portfolio, particularly the absence of key high-growth technology stocks and a targeted increase in specific sectors. Despite some setbacks, the management maintains a constructive view on the domestic equity market's future.
During the second quarter, the landscape for American equities saw a rebound, culminating in new market highs. This positive momentum was fueled by several factors, including a 90-day reprieve on new import tariffs, which alleviated some trade-related anxieties. Furthermore, ongoing progress in international trade negotiations contributed to investor confidence. Domestically, the continued strength of corporate earnings, sustained economic growth, and stable inflation figures provided a solid foundation for the market's ascent. These broader macroeconomic conditions created a dynamic environment that, while generally favorable, also highlighted the impact of specific sector exposures on portfolio performance.
A significant factor contributing to the fund's underperformance relative to the S&P 500 was its lack of exposure to the semiconductor industry. Notably, the decision not to hold shares in NVIDIA Corp and Broadcom Inc, both significant components of the benchmark index, proved detrimental to the fund's comparative returns. These companies experienced substantial growth during the period, driven by innovation and demand in the technology sector. Conversely, the fund benefited from its avoidance of Berkshire Hathaway, a conglomerate and another index component, which helped mitigate some of the negative pressures on performance. In response to market dynamics and internal analysis, the fund proactively boosted its allocation to the healthcare sector, signaling a strategic repositioning to capture potential opportunities in that domain. This move reflects the fund manager's active management approach, adjusting the portfolio based on their outlook for various industries.
Looking ahead, the fund's managers express cautious optimism regarding the prospects for U.S. equities. This outlook is predicated on the expectation that the supportive economic conditions, including stable inflation and continued corporate earnings growth, will persist. However, the 'cautious' aspect of their optimism suggests an awareness of potential market volatilities and an emphasis on selective investment strategies to navigate the evolving financial landscape effectively. The fund will likely continue to adapt its holdings, balancing sector-specific opportunities with a broader market perspective to enhance long-term value creation for its investors.