Monthly commentary - Mackenzie Greenchip Team

Written by the Mackenzie Greenchip Team

Portfolio Manager Monthly Insights

Key takeaways

Environmental sectors were largely in line with broad global equities for the month, while the Greenchip strategy slightly outperformed.  

Greenchip was helped by weak US dollar performance – and a rising Euro in particular – as well as by strong performance of Canadian-headquartered copper mining companies, led by Hudbay which reported strong production results and gained nearly 30%.

Fiscal challenges are building across most large nations of the world while financial conditions get only looser and ignore these risks.  We believe the Greenchip strategy, positioned in essential materials, services, and infrastructure, stands to perform relatively better than broader markets with their increasing reliance on very highly-valued digital and discretionary parts of the economy.

Macroeconomic recap

In a month of remarkable political developments, global asset markets kept their winning streak alive. Trump and Putin shook hands in Alaska, yet easy solutions or Trump-style ‘deals’ seemed increasingly unlikely to end the Ukraine conflict.  India brushed off Trump’s threats of secondary sanctions for purchasing Russian oil, providing more evidence that US and Western threats are increasingly ineffective in influencing the actions of non-Western nations. Trump was hardly less active on the domestic front, taking actions that further erode trust in American institutions, including the government’s statistical agency and, more importantly, their central bank.  Trump plans to replace an outgoing governor with a Trump loyalist and is threatening to fire another.  Combined with regular berating of the current Chair, Jerome Powell, this represents a brazen power grab on what economists and financial experts have historically considered a vital support for monetary discipline: central bank independence.  While equity markets took this all in stride – and even celebrated the prospect of lower interest rates amidst historically speculative financial conditions – there were signs of greater unease among other assets.  Long-term interest rates rose despite increased likelihood of short-term cuts and gold and silver continued to make record highs.

Current positioning and Outlook

Environmental sectors were largely in line with broad global equities for the month, while the Greenchip strategy slightly outperformed.  Greenchip was helped by weak US dollar performance – and a rising Euro in particular – as well as by strong performance of Canadian-headquartered copper mining companies, led by Hudbay which reported strong production results and gained nearly 30%.  These gains were enough to offset losses in some French equities as that government heads toward a second confidence vote on the budget in less than a year.  Fiscal challenges are building across most large nations of the world while financial conditions get only looser and ignore these risks.  We believe the Greenchip strategy, positioned in essential materials, services, and infrastructure, stands to perform relatively better than broader markets with their increasing reliance on very highly-valued digital and discretionary parts of the economy.

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