Monthly commentary - Mackenzie Betterworld Team

Written by the Mackenzie Betterworld Team

Market overview

In April, investor sentiment deteriorated sharply amid heightened concerns over the global growth outlook following the imposition of sweeping U.S. tariffs. However, by May, optimism returned as markets began to anticipate a more conciliatory stance from the U.S. administration, sparking a renewed buying frenzy driven in part by fear of missing out (FOMO). Global equities surged to near record highs after the U.S. and China agreed to a 90-day reduction in tariffs, with the S&P 500 rebounding to pre-tariff levels in both price and valuation, trading at 21.7x forward earnings. The Canadian TSX index also continued its upward momentum, reaching new all-time highs despite rising domestic bond yields. Yet, while equity markets rallied, investor unease shifted to the global bond market, where inflation fears, fiscal concerns, and weak auction demand pushed long-term yields significantly higher. The Bloomberg U.S. Aggregate Bond Index declined by 0.7% in May, as yields rose across the curve. Interestingly, the U.S. dollar weakened despite rising 2-year yields and a favorable interest rate differential which is an unexpected divergence from historical norms that added to inflationary pressures and further strengthened the investment case for gold. Meanwhile, the Bloomberg Commodity Index slipped -0.9%, although WTI crude oil rose 4.4% despite OPEC+ announcing additional supply. While equity markets have largely priced in positive developments, uncertainty around the long-term tariff outcome persists. With the equity risk premium (EY-BY) in the U.S. nearly evaporated, further gains in the S&P 500 may now depend on a renewed decline in bond yields.

Portfolio and Sectors review

Mackenzie Betterworld Global Equity Fund

The Mackenzie Betterworld Global Equity Fund performed in line with its benchmark (MSCI World ex Fossil Fuels Index) for the month. Stock selection in industrials and utilities contributed most to portfolio performance while stock selection in consumer discretionary and health care detracted to portfolio performance.

Constellation Energy, leading energy company specializing in reliable power generation, particularly from nuclear and natural gas sources saw its share price steadily climb over the month, driven by a compelling mix of beat-and-raise earnings, sector-wide momentum, and enhanced top-line visibility through M&A activity and long-term power contracts. From a portfolio management perspective, this appears to be a strategic breakout, offering both defensive strength (via regulated assets and a nuclear moat) and offensive upside (through the Calpine acquisition and rising AI-driven energy demand).

PJM Interconnection, the U.S. largest regional transmission organization, has selected the Crane Clean Energy Center for expedited grid connection under its Reliability Resource Initiative. The planned restart of Crane’s Unit 1 reactor is set to deliver reliable, emissions-free power to the grid amid tightening reserve margins and rising electricity prices. Notably, Microsoft has been announced as the contracted offtaker, underscoring the growing demand for clean energy from major tech players. PJM Interconnection is a regional transmission organization (RTO). It coordinates the movement of wholesale electricity in all or parts of 13 U.S. states and the District of Columbia.

Mackenzie Betterworld Canadian Equity Fund

The Mackenzie Betterworld Canadian Equity Fund outperformed its benchmark (S&P/TSX Composite Fossil Fuel Reserves Free Index) in May. The fund's stock selection in the consumer staples and the industrials sectors contributed most to portfolio performance. However, an overweight allocation to financials detracted to the portfolio's overall performance.

As previously noted, consumer staples stood out as a strong contributor to portfolio performance in May. Portfolio holding SunOpta delivered an earnings beat, driven by a 12.2% increase in volume across its plant-based beverages, broths, and fruit snacks. The company raised its guidance and announced a $425 million share buyback.

Meanwhile, Jamieson Wellness reported 14% year-over-year revenue growth, with branded segments up nearly 14% and its China business surging 52%. The company demonstrated disciplined capital allocation, executing a $10 million share repurchase and redeeming preferred shares held by its Chinese partner, DCP.

In the industrials sector, portfolio holding AtkinsRéalis delivered strong Q1 results, highlighted by an 80% year-over-year revenue surge in its nuclear division. The company secured a C$450 million contract for the Darlington Small Modular Reactor (SMR) project through its subsidiary, Candu Energy. Demonstrating a commitment to shareholder returns, AtkinsRéalis also repurchased C$25.7 million worth of shares during the quarter.

Proxy Voting

Proxy season continued to gain momentum, with the Betterworld team participating via proxy in 49 shareholder meetings: 41 in North America and 8 in Europe. Below are the proxy voting summary results for May.

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