OTEX - ClearBridge Canadian Dividend Strategy Q2 2024 Commentary

2024-07-26 01:30:00 ET

Summary

• ClearBridge is a leading global asset manager committed to active management. Research-based stock selection guides our investment approach, with our strategies reflecting the highest-conviction ideas of our portfolio managers.
• Without the strength of AI-driven and Magnificent Seven returns available to the U.S. market, Canadian equities performed more in line with the “S&P 493.”.
• We were active in managing metals and mining exposure, trimming one outperformer to capture gains and initiating positions in two royalty/streaming businesses.
• Differences in the composition of Canadian and U.S. equity markets have led to significant divergence in performance, to the point where the resulting capital flows and market concentration are creating overlooked opportunities.

By Ryan Crowther, CFA & Les E. Stelmach, CFA

Divergence in Canadian and U.S. Equities Opens Opportunities

Market Overview

Although it reached new all-time highs in the middle of the quarter, the S&P/TSX Composite Total Return Index ('TRI') declined in June to finish down 0.53% in the second quarter (in Canadian dollars). Without the strength of AI-driven and Magnificent Seven returns available to the U.S. market, Canadian equities performed more in line with the “S&P 493.” Benchmark 10-year interest rates in Canada and the U.S. ended the second quarter roughly flat at 3.50% and 4.40%, respectively. Although below their October 2023 highs, around the time of the Fed’s dovish pivot, 10-year rates remained at heights not seen since the Global Financial Crisis. Consensus expectations for Fed rate cuts in 2024 tempered further in the second quarter, with futures markets now pushing out most cuts to late 2024/2025, as opposed to the six cuts expected at the beginning of this year....

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