ClearBridge Canadian Equity Strategy Q1 2025 Commentary

2025-04-13 23:33:00 ET

Summary

• During the first quarter, the ClearBridge Canadian Equity Strategy outperformed its S&P/TSX benchmark.
• A Canadian equity market battle hardened by U.S. tariff actions delivered gains in the first quarter, led by sparkling performance from the gold- and silver-dominated materials sectors as well as energy and traditionally defensive utilities and communication services.
• The Strategy outperformed as a result of strong stock selection in utilities, energy and financials and more defensive positioning versus the benchmark.
• While some damage from tariff and trade restrictions is already done, Canada’s economy is, and will remain, heavily intertwined with the U.S., as will many of the businesses owned in the Strategy. Given a muddied outlook, owning businesses with resilience and predictability remains our preferred positioning.

By Garey J. Aitken, CFA & Timothy W. Caulfield, CFA

Metals, Defensives Support Canadian Resilience

Market Overview

Despite the first quarter of 2025 being dominated by uncertainty surrounding U.S. tariffs, a battle-hardened Canadian equity market, highlighted by sparkling performance in the materials sector, finished the quarter in positive territory, with the S&P/TSX Composite Total Return Index ((TRI)) increasing 1.5%. This was quite the achievement for the primary bourse of a country that’s been subject to a steady diet of threats by the current U.S. administration, including not only continuously changing tariffs (and vows to “crush” and “permanently shut down” the Canadian auto industry), but also Canada’s sovereignty. But make no mistake, the prospects of a global trade war weighed heavily on sentiment and most sectors were worse off for it. After the Canadian equity market reached an all-time high on January 30, it subsequently declined in both February and March while credit spreads meaningfully increased for the first time since 2022....

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