The John Hancock 529 Enrollment-Based Portfolio's 2037-2040 vintage lost ground in Q1 as Middle East conflict and AI stock selloff hit equity-heavy target-date strategy.
The John Hancock 529 Enrollment-Based Portfolio's 2037-2040 vintage posted a first-quarter loss, the fund's commentary said, as an escalation in the Middle East conflict and a selloff in artificial-intelligence stocks weighed on equity markets.
The portfolio is a target-date 529 plan. Its asset allocation shifts automatically as the beneficiary approaches college age. For the 2037-2040 series, the equity weighting remains heavy, with a tilt toward growth and technology names over a still-distant horizon. That structural exposure made the strategy vulnerable to the quarter's double blow.
Middle East hostilities intensified in January and February, sending crude oil prices sharply higher and triggering a risk-off rotation across global equity markets. Energy and defense stocks gained. The broader market, particularly growth and tech, sold off. The move compressed valuations in the very sectors a target-date fund's early-stage equity sleeve tends to hold.
AI concerns added pressure. After a multiyear rally in names like NVIDIA and other large-cap semiconductor and software companies, investors began questioning valuation multiples and the pace of monetisation from enterprise AI deployments. A wave of profit-taking in February and March hit the largest equity holdings in the portfolio, the commentary indicated.
The quarter's loss mirrors the broader downturn in U.S. growth stocks. Major equity indices finished Q1 in negative territory. The tech-heavy Nasdaq suffered the steepest declines. The 529 plan's equity-heavy glide path for the 2037-2040 cohort meant it could not avoid the pullback.
For investors in the plan, the loss is a reminder that target-date funds are not insulated from market cycles. The glide path will gradually rotate into fixed income as the target date approaches. For the 2037-2040 vintage, the equity allocation will remain elevated for years. That gives the portfolio time to recover before withdrawals begin. It also leaves it exposed to further drawdowns if the same catalysts intensify.
The fund's commentary did not disclose specific sector weights or top holdings. The full report is available on the John Hancock website. The next quarterly report will cover the second quarter, when the same catalysts may still be in play.
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