Monthly commentary - Mackenzie Greenchip Team

Written by the Mackenzie Greenchip Team

Portfolio Manager Monthly Insights

Key takeaways

Environmental indexes closely tracked broader indexes while the Greenchip strategy outperformed.  

Greenchip benefitted from US dollar weakness (and more directly from Euro strength) and, somewhat relatedly, from strong performance of our copper miner investments, all with gains of 10% or better.

Our US industrial holdings were strong in sympathy with US markets in general, with automotive sensors producer Sensata standing out, up more than 15%.

Our solar investments also performed well, despite ongoing challenges to the industry in the United States associated with the ‘Big Beautiful Bill’ and the intent to reverse many of the incentives that were provided for in the Inflation Reduction Act of 2022.

Macroeconomic recap

While there was little in political and financial developments in June to suggest reduced tension or greater economic optimism, by the end of the month global asset markets had dismissed such concerns entirely. Even as the Israeli-American conflict with Iran entered a new and more dangerous phase and as the tariff deadlines that had been extended during the ‘liberation day’ chaos in April approached once again, US equity markets were back to making daily all-time highs with speculative fever running as hot as ever. Outside of equities, however, the ‘all clear’ signal was far from resounding: the US dollar closed at its low for the year, down 10% against a basket of global currencies, US interest rates remained stubbornly high, and precious metals were among the best performing asset classes. The successful passage of Trump’s ‘Big Beautiful Bill’ (BBB), replete with government handouts and with little of the fiscal discipline initially promised, will do little to stem the pressure on US finances, the dollar, interest rates, and inflation. Fiscal pressure is unlikely, however, to be limited to the US alone as June’s NATO meetings exacerbated both economic and political risks with promises—in response to US demands—to significantly increase spending on defense to as much as 5% of GDP.

Current positioning and Outlook

Environmental indexes closely tracked broader indexes while the Greenchip strategy outperformed. Greenchip benefitted from aforementioned US dollar weakness (and more directly from Euro strength) and, somewhat relatedly, from strong performance of our copper miner investments, all with gains of 10% or better. Our US industrial holdings were strong in sympathy with US markets in general, with automotive sensors producer Sensata standing out, up more than 15%. Our solar investments also performed well, despite ongoing challenges to the industry in the United States associated with the BBB and the intent to reverse many of the incentives that were provided for in the Inflation Reduction Act of 2022. Although language targeting Chinese owners and producers was introduced, there was pushback among American industry participants as such language would be likely to drastically reduce available supply and further raise prices. While still fluid and awaiting IRS interpretations, worst case scenarios appear unlikely and we believe that our companies, especially Canadian Solar, are well positioned to do much better in their US activities than was broadly expected by investors.

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