The John Hancock Bond Fund (JHBIX) concluded 2025 with strong performance, surpassing its benchmark, the Bloomberg U.S. Aggregate Bond Index. The fourth quarter was characterized by a stable market environment, supported by robust economic growth and consistent credit conditions, alongside a moderate increase in inflation. This positive outcome stemmed primarily from strategic allocation choices, notably an underweighting in U.S. Treasuries and a pronounced overweighting in Mortgage-Backed Securities (MBS). The fund actively increased its exposure to securitized credit, particularly non-agency residential MBS and non-traditional subsectors within the Asset-Backed Securities (ABS) market, reflecting a responsive approach to market dynamics. Looking ahead, the investment team anticipates heightened market volatility due to evolving Federal Reserve policy, but remains optimistic about the potential for elevated longer-term yields and strong credit fundamentals to bolster fixed-income investments.
During the fourth quarter of 2025, the Bloomberg U.S. Aggregate Bond Index, serving as the fund's primary benchmark, experienced a rise of 1.10%. The fund successfully concluded the year with a gain of 7.30%, marking its third consecutive year of positive total returns. This period was distinguished by a relatively stable economic climate, fostering solid growth and maintaining steady credit conditions, with only a modest upward trend in inflation. These factors contributed to a generally favorable environment for bond investments.
The fund's outperformance largely resulted from its strategic asset allocation decisions. A key component of this strategy was maintaining an underweight position in U.S. Treasuries, which proved beneficial given the market's trajectory. Concurrently, an overweight position in Mortgage-Backed Securities (MBS) significantly contributed to the fund’s robust returns. The investment team further capitalized on market opportunities by expanding the fund's holdings in securitized credit. This included substantial purchases of non-agency residential MBS and investments in less conventional subsectors of the Asset-Backed Securities (ABS) market, enhancing diversification and yield potential.
Despite the calm market conditions observed in the fourth quarter, the forward outlook points to increased volatility. Investors are expected to face uncertainties related to the Federal Reserve's future policy decisions, which are anticipated to remain data-driven. However, the investment strategy is prepared to navigate this environment, underpinned by expectations of elevated longer-term yields and stable credit fundamentals. These elements are projected to provide continued support for fixed-income allocations, allowing the fund to potentially generate favorable returns even amidst fluctuating market sentiment.
In summary, the John Hancock Bond Fund delivered a strong performance in 2025, primarily driven by astute asset allocation and strategic investments in securitized credit. While future market conditions are expected to be more volatile due to Federal Reserve policy, the fund is positioned to leverage higher long-term yields and sound credit fundamentals.