The United States posted commendable growth over the recent months, while the Canadian, Eurozone and Japanese economies continue to lack the same dynamism. Meanwhile, the labor market further normalized towards equilibrium from the previously tight conditions of the post-pandemic years.
With inflation back to reasonable levels and worried about the evolution of the labor market, the Federal Reserve initiated a monetary easing cycle in September with a 50-basis points overnight rate cut: two years after its last hike. It joined the Bank of Canada and the European Central Bank which began their easing cycle earlier last June.
The Eurozone’s economic weakness is broad-based. Indicators such as the Purchaser Managers Index or Germany’s industrial production, points to general stagnation. China is also struggling. It introduced a series of important stimulus measures, but their impact should be muted since this country faces a host of issues such as depressed household spending or a declining population.
The corporate world remains in good shape, with rising revenues and strong earnings.
The MSCI ACWI had a 5.3% return this quarter.
The rate sensitive Real Estate (15%) and Financials (15%) sectors were the best performing. Lower rates are favorable to real estate and financial investments valuations, and beneficial to the banking industry.
Conversely, the cyclical Energy (-3%) and Information Technology sectors (0%) were laggards. Oil prices fell due to concerns over a global economic slowdown. Semiconductors took a pause after a strong first half of 2024. Investors are eagerly awaiting solid returns on AI investments as companies work to prove the technology's long-term profitability.
The Triasima ACWE Fund had a 2.5% return for the quarter.
Security selection detracted value, especially in the Health Care, Industrials, and Information Technology sectors. Sector allocation contributed to added value, mainly due to the large underweights in the Information Technology and Energy sectors.
The following table presents the top and bottom contributors to relative return:
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The Industrials sector’s overweight was increased with the addition of three new securities. The purchases were largely funded out of reductions in the Financials sector overweight.
On the quantitative side, the Fund has higher revenue and profits growth than the benchmark. Profitability and Expectations metrics are superior. Valuation and risk parameters indicate the Fund is more expensive and volatile.
The MSCI ACWI has been moving up almost uninterruptedly since October 2022, repeatedly setting new all-time highs since March 2024. This Trend, a powerful bull phase, looks set to continue. Both the short- and long-term Momentum style factors strongly underperformed this quarter, a disadvantageous situation given Triasima’s investment methodology.
The fundamental background to worldwide equities has been unchanged in recent months. The strong American economy, lower inflation and falling interest rates are positive factors, somewhat offset by poor growth conditions in China, Europe, Japan, and other countries. The expected return for the equity market over the course of the next months is above average.
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.
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