Monthly commentary - Mackenzie Greenchip funds

Macroeconomic recap

Global equity markets closed another positive month and quarter in September, but under the surface pressure continued to build. Broadly speaking for the quarter and the month, interest rates rose to multi-decade highs, oil prices rose to nearly $100 per barrel, food prices experienced double-digit increases, European and emerging market equities were down, and so too were safe-haven precious metals. While global stocks posted gains, these were entirely delivered by the so-called ‘Magnificent 7’ American digital giants. The average of the world’s – and America’s – remaining stocks was down for both the quarter and the month.

As the Magnificent 7 stocks led returns, AI continued to dominate news, even in the face of remarkable – and alarming – geopolitical developments including incendiary speeches by President Trump and Prime Minister Natanyahu at the UN General Assembly, and Chinese President Xi Jinping’s visit to Washington. Despite Mag 7 gains, the AI news was not necessarily positive. Oracle gave a force majeure notice to its lessor for a giant New Mexico data centre as permitting delays for natural gas pipelines and power underscored the increasing pressure on infrastructure that is being caused by the relentless AI buildout. And, in advance of Congressional hearings about AI regulation, the largest purveyors of AI models were loudly warning about ‘rogue AI’ and possible mass death events, seemingly asking for market protection and antitrust waivers in advance of two hoped-for multi-trillion-dollar IPOs in Anthropic and OpenAI.

Current positioning and outlook

With Tesla as its only Mag 7 constituent and a lower US weighting than broad global benchmarks, the FactSet Global Green Revenue Index underperformed, down slightly in September while losing more than 7% in Q3. While the Greenchip strategy fared better in the quarter, it was a laggard in September. Geographic weights contributed to Greenchip weakness, as our largest regional exposure in Europe trailed global benchmarks by nearly 5%. US utilities were weak in the face of climbing interest rates, and California utility PG&E continued to trade poorly after a disappointing legislative outcome related to wildfire liability management. Our largest copper miner, First Quantum, traded down by over 15% after confusing announcements from the Panamanian government framing the reopening of its Cobre Panamá mine as an ‘orderly closure’.  We believe the market misunderstood the First Quantum news and see very good value in this investment. On the positive side, our Brazilian investments rebounded in advance of an important presidential election in October, led by agricultural logistics provider Rumo, which gained nearly 10%, as Brazilian harvest volumes appear to be strong and the competitiveness of its rail networks has improved over trucking with high diesel prices.

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