Written by the Mackenzie Greenchip Team
Key takeaways
- Global assets turned in a small gain in April, based largely on positive response to earnings reports and AI excitement from US mega tech companies.
- At the end of April, a group of ten of these household names represented more than 25% of the entire S&P 500 index and had returned 36% for the year to date.
- Capital spending on industrial products and systems is robust and most industrial and electronics companies are indicating very strong market conditions and outlooks.
- The Greenchip team believes there is sufficient pent-up demand in electricity and other infrastructure to support better growth through upcoming cycles and valuations have improved significantly with lower share prices and better financials.
Macroeconomic recap
Global assets turned in a small gain in April, based largely on positive response to earnings reports and AI excitement from US mega tech companies. As market participants seemingly put the banking crises that emerged in March out of mind, April saw the failure of First Republic Bank and ,as a result, now three of America’s four largest bank failures in history have taken place this year. While the consequent growing economic uncertainty and reduced availability of financing threatened the outlook for much of the economy and led to declines in share prices, investors assessed US tech giants as invulnerable to such changes and bid up their already enormous valuations. At the end of April, a group of ten of these household names represented more than 25% of the entire S&P 500 index and had returned 36% for the year to date. Removing their contribution, the remainder of the S&P was slightly down.
Current positioning and notable changes
With such narrow market leadership, environmental indexes (along with most other sectors) and the Greenchip strategy underperformed the broad averages. Big American companies in the environmental sector such as FirstSolar, Enphase, and even Tesla all reported earnings that were poorly received. Commodity prices including energy, fertilizers, and ‘green’ metals such as copper or lithium all continued their decline off their highs from last year as volumes were generally tepid and customers reduced inventories. Among Greenchip holdings, Alstom declined more than 10% on news of the departure of their CFO to French telecoms company Orange and ST Micro and Infineon declined in spite of solid earnings reports as investors anticipate a cyclical decline in the electronic components market.
Outlook
Nevertheless, capital spending on industrial products and systems is robust and most industrial and electronics companies, including those that are in the Greenchip portfolios and those that are not, are indicating very strong market conditions and outlooks. While investors may expect such conditions are too good to last – and we would agree – we believe that there is sufficient pent-up demand in electricity and other infrastructure to support better growth through upcoming cycles.
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 April 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.