MCT May 2024 Market Commentary

  • Canada
  • MCT May 2024 Market Commentary

Equity markets finally took a breather in April after generating positive returns for five consecutive months. The Fund’s NAV generated a total return of -3.7% which compares to the benchmark return of -2.8%. We think a partial retracement of the recent rally from the October 2023 lows represents a healthy correction within a longer-term bull market and we maintain our positive outlook on Canadian equities.

In British Pounds, the TSX Composite returned -2.5% in April and outperformed most global indices. Energy and materials outperformed once again as investors navigated rising geopolitical tensions. Israel’s attack on a military base in Syria, which killed eight officers of Iran’s IRGC, resulted in Iran firing over 300 missiles and drones directly at Israel for the first time in history. Although direct conflicts between the two nations are unlikely in the near term, the risk of further clashes between Israel and affiliated proxy groups in the region remains extremely high. Canadian equities typically outperform when geopolitical risks are elevated due to Canada’s exposure to commodities and resource sectors. Considering U.S. Congress just passed a $95 billion foreign aid package that is likely to prolong the ongoing conflicts in Ukraine and the Middle East, we expect geopolitical tensions to remain elevated for the foreseeable future.

The reasons to own Canadian equities go beyond hedging against geopolitical risk. Canada has seen a resurgence in foreign investment recently, with several major announcements in the past few months. Honda announced a $15 billion EV manufacturing plant in Ontario that will add over 1,000 new manufacturing jobs and secures the current employment of 4,200 workers at its two existing sites. The announcement comes on the heels of IBM announcing plans to invest over $730 million in its Canadian semiconductor packaging and testing plant in Quebec. More foreign investment may be on the horizon since Warren Buffet stated that Berkshire Hathaway is evaluating a major investment in Canada at its recent annual shareholder meeting in Omaha. Many of the companies in MCT’s portfolio possess the quality/value characteristics that Buffet typically looks for and could be potential investment candidates.

Enbridge, the largest energy infrastructure company in North America, fits this description. Enbridge has a diverse asset base that generates significant free cash flow. The company reported Q1’24 adjusted EBITDA of $4.95 billion, beating street estimates by nearly $500 million. The company also sees a variety of organic growth opportunities in the near future thanks to the immense energy needs of artificial intelligence and data centers. After a decade of relatively flat power growth in the U.S., electricity demand is expected to grow by as much as 20% by 2030 according to Wells Fargo. Enbridge is well-positioned to capitalize on this opportunity with its established network. The company is also a major factor in U.S. LNG, currently supplying 15% of the natural gas to U.S. LNG export facilities with a goal of growing to 30% by 2030.

The U.S. economy has been remarkably resilient in recent months. This has caused markets to recalibrate their future interest rate assumptions and it is becoming increasingly likely that monetary policy will be more restrictive in the U.S. than Canada. Fed rate cuts have been pushed out to the end of the year with markets now pricing less than two total rate cuts in 2024. In contrast, the Bank of Canada is now expected to start cutting rates this summer with nearly three total cuts expected in 2024. Rate cuts from the Bank of Canada should act as a positive catalyst for MCT’s portfolio and its core positions in REITs, utilities, financials and pipelines.


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 May 2024 Market Commentary
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