MCT April 2024 Market Commentary

  • Canada
  • MCT April 2024 Market Commentary
M-Asset

Equity markets rallied in March for a fifth consecutive month. In British Pounds, the Fund generated a total return of 5.2%, outperforming both the Benchmark and the TSX Composite which returned 3.9% and 4.4%, respectively.

We continue to see encouraging signs that the market rally is broadening beyond large-cap tech stocks. Cyclical and value sectors led the market higher in March after lagging in the previous two months. This trend supported a 4.1% monthly return (local currency) in the TSX Composite Index and vaulted it to a new record high. Surging prices of key commodities, including oil, copper and gold, have provided a boost to Canada’s resource industries with the TSX materials and energy sectors returning 15.4% and 7.3% in March, respectively.

The underlying strength in commodity prices can be partially attributed to an increasingly positive economic backdrop. Purchasing manager indexes in both the U.S. and China are back above 50 – the level that differentiates between expansion and contraction. Meanwhile, the IMF now expects the world economy to grow faster than it had predicted in January, when it forecast growth of 3.1% in 2024. These data points all support robust consumer spending and manufacturing activity which traditionally leads to higher demand for commodity inputs. U.S. crude futures have surged to $85 a barrel for the first time since October, bringing its year-to-date advance to 19%.

Exploration & Production companies, which the Fund is overweight, were positive contributors to performance in Q1. Peyto, Canadian Natural Resources and Suncor generated total returns of 27%, 21.8% and 19.1%, respectively. These companies possess attractive operating leverage given their low levels of debt and streamlined operations. Assuming commodity prices remain strong, we expect them to re-accelerate their capital returns to shareholders in the form of dividend bumps, share buybacks and special distributions.

Materials have been another area of strength in Canadian markets recently. The Fund has increased its exposure to the sector by initiating positions in Nutrien (NTR) and B2Gold Corp (BTO). NTR sells key crop inputs and services including potash and nitrogen to the agriculture industry. Potash prices rose 8% in March, boosting the outlook for topline growth, while the company sharpens its focus on operations by adopting tele-remote and autonomous mining technologies. BTO is an intermediate gold producer with a strong growth profile. The price of gold has risen to all-time highs in recent weeks and is trading above US$2,400/oz. BTO owns and operates three producing gold mines in Mali, Namibia and the Philippines, in addition to several exploration assets. It is a proven operator in the Canadian mining sector with a diversified asset base. We were encouraged to see BTO’s costs come in below its original guidance range in 2023 and are optimistic that it can continue to improve its operating efficiency in the years ahead.

 

 

 

 

Disclaimer

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. You will usually pay brokerage fees to your dealer if you purchase or sell units/shares of investment funds on the Toronto Stock Exchange or other alternative Canadian trading system (an “Exchange”). If the units/shares are purchased or sold on an Exchange, investors may pay more than the current net asset value when buying and may receive less than the current net asset value when selling them. There are ongoing fees and expenses associated with owning units or shares of an investment fund. An investment fund must prepare disclosure documents that contain key information about the fund. You can find more detailed information about the fund in these documents. Mutual funds and investment funds are not guaranteed, their values change frequently and past performance may not be repeated. Certain statements in this disclosure are forward-looking. Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may”, “will”, “should”, “could”, “expect”, “anticipate”, “intend”, “plan”, “believe”, or “estimate”, or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS. FLS are not guarantees of future performance and are by their nature based on numerous assumptions. Although the FLS contained herein are based upon what Middlefield Funds and the portfolio manager believe to be reasonable assumptions, neither Middlefield Funds nor the portfolio manager can assure that actual results will be consistent with these FLS. The reader is cautioned to consider the FLS carefully and not to place undue reliance on FLS. Unless required by applicable law, it is not undertaken, and specifically disclaimed that there is any intention or obligation to update or revise FLS, whether as a result of new information, future events or otherwise.

This material has been prepared for informational purposes only without regard to any particular user’s investment objectives or financial situation. This communication constitutes neither a recommendation to enter into a particular transaction nor a representation that any product described herein is suitable or appropriate for you. Investment decisions should be made with guidance from a qualified professional. The opinions contained in this report are solely those of Middlefield Limited (“ML”) and are subject to change without notice. ML makes every effort to ensure that the information has been derived from sources believed to reliable, but we cannot represent that they are complete or accurate. However, ML assumes no responsibility for any losses or damages, whether direct or indirect which arise from the use of this information. ML is under no obligation to update the information contained herein. This document is not to be construed as a solicitation, recommendation or offer to buy or sell any security, financial product or instrument.

  • Canada
  • MCT April 2024 Market Commentary
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