MCT generated a NAV return of 2.1% in October, outperforming the Benchmark and the TSX Composite Index. The Fund’s share price appreciated 6%, resulting in a narrowing of its NAV discount and a year-to-date total return of 23.5%. Canadian equities carry significant momentum heading into year-end having outperformed the S&P 500 by more than 6% since the end of H1.
The American public has voted, and Donald Trump will re-take the White House for a second term as President. Although several elections for the House of Representatives remain too close to call, we anticipate a red sweep with betting markets pricing over a 90% chance of the Republican Party winning a House majority. We believe former President Trump’s pro-business agenda—centered on deregulation, tax cuts, lower interest rates, and support for oil and natural gas—will create a stronger growth environment for the financials, energy infrastructure, and real estate sectors.
In the Financials sector, the easing of regulatory burdens will reduce capital requirements, fostering a more favorable environment for strategic mergers and acquisitions. Canadian banks with significant U.S. exposure, such as BMO, RBC, and Scotiabank, are positioned to benefit from increased activity across their capital markets, commercial, and retail banking divisions. Moreover, these banks’ wealth management businesses should see continued growth as interest rates decline, driving demand for both equity and fixed-income products.
Trump’s support for oil and natural gas will benefit Canadian energy infrastructure companies, especially those with substantial U.S. exposure, like Enbridge and TC Energy. The expected lifting of the U.S. ban on new LNG export projects in 2025, coupled with a streamlined environmental review process for new LNG and pipeline developments, will further enhance sector growth. Natural gas, a key power source for AI-driven data center expansions, stands to see increased demand. MCT holdings in the energy space, including Tourmaline, Canadian Natural Resources, ARC Resources, and Peyto, are well-positioned to capitalize on these favorable tailwinds.
Bond yields spiked and REITs sold off following Trump’s victory due to concerns over inflation. We believe this market reaction is short-term, and higher REIT valuations are likely to follow. Considering much of Trump’s election platform focused on inflation and bringing down prices, we believe his tariff rhetoric is largely performative and being used as a negotiation tactic. Over time, we also expect government spending to be rationalized, and this is likely to reduce the bond market’s concerns about rising deficits. Interest rate cuts are already underway in Canada, the U.K., and the U.S., with an additional 100 basis points of cuts expected in the next six to nine months. We continue to believe the direction of travel for rates is lower which should support further improvement in sentiment for the sector.
With the election now behind us and seasonality tailwinds starting to kick in, we believe the setup for a year-end rally is attractive. A robust U.S. economy is historically a strong tailwind for corporate earnings in Canada which should drive continued outperformance in MCT’s portfolio.
