ClearBridge Canadian Small Cap Strategy Q1 2025 Commentary

2025-04-13 23:30:00 ET

Summary

• The ClearBridge Canadian Small Cap Strategy underperformed its benchmark in the quarter.
• The S&P/TSX Small Cap Index was modestly higher in the first quarter as strength in the gold-driven materials sector more than offset cyclical weakness in the rest of the index.
• While Canada seems to have been spared the most draconian of Trump’s tariff plans, the size and unknown duration of the U.S. tariff agenda has brought into question the outlook for inflation, employment and GDP growth.
• An underweight position to gold was the main driver of Strategy underperformance versus the index.

By Garey J. Aitken, CFA & Michael Richmond, CFA

Gold Rush Carries Small Caps

Market Overview

We suspect market participants from a century ago would have felt right at home with the topics that dominated Canadian small cap equities in the first quarter of 2025 — tariffs and gold. Tariffs were by far the most impactful macro driver of equity performance. The “will-they, won’t-they” gyrations out of Washington resulted in a sell first, ask questions later approach to a broad swath of the Canadian small cap market....

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