.svg){kind=logo}
Written by the Mackenzie Greenchip Team
Key takeaways
Global asset market weakness broadened in September with bonds and equities enduring substantial losses across most sectors and geographies.
Rising rates also brought financial tension to the fore once again in low-rate regions Japan and Europe.
Environmental sectors underperformed broader equity markets. Utilities in general, considered as something of a bond proxy were pressured by higher rates.
Despite all the utility turmoil, Greenchip’s European utilities performed relatively well.
Macroeconomic recap
Global asset market weakness broadened in September with bonds and equities enduring substantial losses across most sectors and geographies. Interest rates remained the focal point, with the US Federal Reserve adding another quarter point increase after a one-meeting pause and sending very mixed signals about plans for the balance of the year and into 2024. While headline inflation readings remain below the worst of earlier in the year, labour market remain tight. There is little indication of a return to the deflation era that was the rule in the past decade. With rates rising past 5% in US long-dated treasuries, bond portfolios lost nearly 10% in September alone, a dramatic loss for what is generally understood to be a conservative investment. Global bonds fared even worse than those in the US while commodity prices fell in anticipation of weaker economic activity, with even oil declining more than 5% in the last week of the month. Rising rates also brought financial tension to the fore once again in low-rate regions Japan and Europe.
Current positioning and notable changes
Although equity market weakness was much broader than earlier in the year, and even US tech sustained losses, environmental sectors still underperformed. Utilities in general, considered as something of a bond proxy, were pressured by higher rates, while those specifically focused on renewable energy development experienced even greater pressure due to the significant impact on construction financing. US renewable giant Nextera Energy, long the most prominent American developer and a global leader in terms of scale, indicated a weakening of returns on new projects and financial trouble at NextEra Energy Partners, a related company established to buy developments from the parent. Nextera’s announcement was a catalyst for declines across US utilities, and for another leg down in wind and solar equipment producers which were already under heavy selling pressure.
Outlook
Despite all the utility turmoil, Greenchip’s European utilities performed relatively well. We selectively added to positions during the month. Overall, the Mackenzie Greenchip Global Environmental All Cap Fund was hurt by losses in solar equipment manufacturers, declines in the Euro and Yen, and by another weak quarterly report from United Natural Foods.
Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.
The contents of this document (including facts, views, opinions, recommendations, descriptions of or references to, products or securities) are not to be used or construed as investment advice, as an offer to sell or the solicitation of an offer to buy, or an endorsement, recommendation or sponsorship of any entity or security cited. Although we endeavour to ensure its accuracy and completeness, we assume no responsibility for any reliance upon it.
This document may contain forward-looking information which reflect our or third party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of September 30, 2023. There should be no expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.
This material is for informational and educational purposes only. It is not a recommendation of any specific investment product, strategy, or decision, and is not intended to suggest taking or refraining from any course of action. It is not intended to address the needs, circumstances, and objectives of any specific investor. Mackenzie Investments, which earns fees when clients select its products and services, is not offering impartial advice in a fiduciary capacity in providing this sales and marketing material. This information is not meant as tax or legal advice. Investors should consult a professional advisor before making investment and financial decisions and for more information on tax rules and other laws, which are complex and subject to change.