Triasima Canadian All Capitalization Equity Fund Commentary – Q4 2024

The economy

The economic situation has been stable in recent months. The United States is growing nicely, at approximately its long-term average of 2.5%, while the Canadian, Eurozone, and Japanese economies continue to lag, hovering around zero growth. With a recently introduced set of stimulus measures, China’s attempt to reaccelerate has had limited success so far.

The 2021 inflation surge has been brought back under control to 2% approximately, except for the United States where it is sticking near 3%. The inverted yield curves of the last few years are normalizing as central banks reduce overnight rates. Interest rates in the United States are above those of other advanced countries, due to its more buoyant economy.    

The North American corporate world is managing well for the most part. Demand is sustained and costs are under control, leading to rising revenues and earnings. The labour market equilibrium, especially, is gradually tilting in favour of employers.

Almost half the world population went to the polls in 2024. In the United States, Donald Trump will be returning to the presidency in January 2025, having won the latest election with his economic and immigration platform. The unpredictable and unconventional nature of his policies and rhetoric are adding complexity to the economic outlook.

The Canadian equity market

The S&P/TSX Composite Index had a 3.8% return this quarter, and 21.6% for 2024. 

Sector returns were widely dispersed. The quarter had a cyclical and growth tone with Information Technology (+22%, led by Shopify), Energy (+7%), and Financials (+7%) being the best performers.

The Communications Services (-19%) and Real Estate (-10%) sectors were impacted by the recent interest rates rebound. In addition, telecom companies face steep competition and lower growth prospects. 

The Fund

The Triasima Canadian All Capitalization Equity Fund had a 3.9% return this quarter and 25.3% for the year.

Sector allocation added relative value in the quarter through the underweight in the Communications sector. Security selection was neutral overall. It had a positive impact in the Materials and Industrials sectors but detracted value in Information Technology and Utilities.

Main security contributors to relative performance :

*Securities not held or underweighted in the Fund.

Tunrover focused on reducing the gold producers overweight in the Materials sector and eliminating disappointing holdings. A notable introduction was Shopify.

The Three-Pillar Approach™

On the quantitative side, the Fund has better risk metrics and higher profitability and earnings growth than the benchmark. Valuation parameters indicate the Fund is more expensive.

The Canadian equity market began a recovery in October 2023, reached an all-time high in March 2024, and marched higher since then. The overall upward trend looks set to continue, but at a slower pace. The Long-Term and Short-Term Momentum, and Growth and Profitability style factors, all typically overweighted in portfolios advised by Triasima, all underperformed this quarter. 

The fundamental background to Canadian equities became more uncertain in the quarter. American growth helps but is offset by increased protectionism concerns, Canada’s poor economic performance, and a dimming benefit from declining interest rates.  

Legal notices

The posted rate of return is a historical total rate of return compounded annually, except for periods of less than one year, which are not annualized. The rate of return shown takes into account fluctuations in unitholder value and the reinvestment of distributions. The posted rate of return does not take into account investment management fees and income taxes payable by the unitholder, which would have the effect of reducing the return. The Funds are not guaranteed, their value fluctuates, and past performance is not indicative of future results.

Data on the FTSE Canada 91 Day T-Bill, FTSE Canada Short Term Bond and FTSE Canada Universal Bond reference indices are provided by FTSE Global Debt Capital Markets Inc.  (“FTSE”). Data on the S&P/TSX Income Trust, S&P/TSX Preferred Share, S&P/TSX SmallCap, and S&P/TSX Composite reference indices are provided by TSX Inc. (“TSX”). Data on the S&P 500® Index are provided by Standard & Poor’s Financial Services LLC (“S&P”). Data on the MSCI EAFE, All Country World, and World reference indices are provided by Morgan Stanley Capital International Inc. (“MSCI”). Lastly, the classification of securities according to the Global Industry Classification Standards (“GICS”) is provided jointly by MSCI and S&P. (FTSE, TSX, S&P, and MSCI are hereafter collectively referred to as “indices and data providers”.) 

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