Monthly commentary - Mackenzie Greenchip Team

December 24, 2024

Portfolio Manager Monthly Insights

Key takeaways

While rates and commodities initially reacted with alarm to fears of ‘Trumpflation’ in November, these fears quickly subsided as the stock bull market raged on.

As American markets celebrated, other global markets struggled, attempting to price in new realities of trade and tariffs, reckoning with political and budget crises (Brazil and France), and dealing with further geopolitical deterioration.

Performance of the Greenchip Global Environmental All Cap Fund during the month was hurt most by renewable energy exposures such as China solar and renewable utilities, by European exposures and by the Euro specifically and, finally, by Brazil where the market was down nearly 10%.

Offsetting these losses were strong performances from several of its largest industrial holdings, including Siemens A.G., its former electrical equipment subsidiary Siemens Energy, and French rail business Alstom.

Macroeconomic recap

November was perhaps the most remarkable month in what has already been a remarkable 2024, and not just for asset markets. Although the US election at the beginning of the month arguably brought about dramatic political change in terms of social, environmental, economic and foreign policies, asset markets largely treated this result as a reason to double down on pre-existing trends: namely dramatic outperformance of US stocks, the US dollar, and even bonds. While rates and commodities initially reacted with alarm to fears of ‘Trumpflation’, these fears quickly subsided as the stock bull market raged on. Speculation prevailed over logic, with Bitcoin gaining nearly 50% while gold prices fell, and with Tesla adding more than $400 billion in value, even as its CEO and brand ambassador took on more diverse and public responsibilities, some of which risk antagonizing his customer base and important foreign markets such as China. As American markets celebrated, other global markets struggled, attempting to price in new realities of trade and tariffs, reckoning with political and budget crises (Brazil and France), and dealing with further geopolitical deterioration. In USD terms, US equities added more than 5% while the rest of the world was roughly flat. Since the end of the global financial crisis in 2009, non-US markets have risen 50% while the US is up more than 500%.

Current positioning and Outlook

It was a mixed picture for environmental sector performance, but only because of the aforementioned anomalous performance of Tesla. Outside of Tesla, environmental businesses were generally sold in response to the less climate-friendly and less trade-friendly policies anticipated from Trump’s second administration. Greenchip performance was hurt most by renewable energy exposures such as China solar and renewable utilities, by European exposures and by the Euro specifically and, finally, by Brazil where the market was down nearly 10% after budget and tax policy announcements by the federal government were poorly received by the investor class. Offsetting these losses were strong performances from several of our largest industrial holdings, ironically mostly headquartered in Europe, in response to strong earnings reports. Highlighting these were Siemens A.G., its former electrical equipment subsidiary Siemens Energy, and French rail business Alstom. The latter two were among our top detractors in 2023 and have recovered these losses, and more, in 2024 as our biggest contributors. Reversion to some kind of normality, or mean, is a tenet of finance. While it seems like US—and global—markets are determined to never revert, we continue to believe that the pressures of capital misallocation driven by such distorted markets will eventually force mean reversion to happen. And we believe our portfolio is well positioned to outperform in this eventuality.

Learn more about the team

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 November 30, 2024. 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.