Triasima Canadian Equity Fund Commentary – Q1 2025

The economy

The year 2025 began with stable and healthy economic activity in the United States and rebounding growth in Canada, Japan and China. The Eurozone economies were continuing to lag. 

The start of Donald Trump’s second presidency is the dominant story of the first quarter. A blizzard of executive orders on immigration, tariffs, and the federal workforce have brought uncertainty and volatility to the economy and capital markets. The disruptions are such that a homegrown recession, preceded by a period of stagflation, is likely to develop in the United States.

So far, most countries affected by tariffs threats have adopted a wait-and-see attitude. But the prospects of a destructive tariffs war are growing. With lower output and higher prices, the expected repercussions on economic efficiency and overall wealth are dire. One significant response was the implementation by Germany of fiscal measures freeing government spending.

The Federal Reserve kept the Fed fund rate unchanged due to higher uncertainty and an inflation rebound while the Bank of Canada lowered its overnight rate again, having more leeway on the inflation and economic fronts. Long-term interest rates have been stable.

The North American corporate world has not yet seen damage to its revenues and profits, but equity markets have become wary. 

The Canadian equity market

The S&P/TSX Composite Index had a 1.5% return this quarter.  

Considering the macro-economic background, the quarter had a cautious tone and sector returns were widely dispersed. Gold producers (+34%), seen as a safe haven, inflated the return of the Materials sector (20%). Other leading sectors were the defensive Utilities (5%) and pipelines heavy Energy (3%). Growth-oriented and cyclical sectors lagged: Information technology (-8%) due to a 11% drop by Shopify, and Industrials (-2%).

The Fund

The Triasima Canadian Equity Fund had a 1.6% return this quarter.

Sector allocation had a negative impact on relative performance, mainly from the overweight to the Information Technology sector. Security selection added value, due to investments in gold producers within the Materials sector.

The following table presents the top and bottom contributors to the relative performance: 

*Securities not held or underweighted in the Fund.

The Materials sector’s weight increased by adding to gold producers and introducing Nutrien. Conversely, the Financials and Utilities sectors were slightly pared back.

The Three-Pillar Approach™

On the quantitative side, the Fund has higher profits growth than the benchmark, as well as better risk, expectations and profitability parameters. However, the Fund is more expensive.

The Canadian equity market was in an upward trend from October 2023 to December 2024: a 14-month bull run. It has been in a sideways pattern in recent months; a commendable outcome given the macro-political background. The Valuation style factor outperformed this quarter, while Growth underperformed.

The fundamental background to Canadian equities worsened in the quarter due to the deteriorating relationship with the United States and the prospects of a tariff war. 

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”.) 

The indices and data providers have awarded limited licences to Triasima allowing it to use the above-mentioned indices and data in its portfolio statements. The information provided by the indices and data providers may not be redistributed, sold or used without the prior written consent of the indices providers concerned. The indices providers assume no liability with respect to the accuracy or completeness of these data or for any delay, interruption, or omission with regard thereto, and makes no warranty or declaration, either explicit or implicit, with regard to the results that might be obtained by using these data or as to the marketability or appropriateness of the data for a specific use