Against All Odds: The Surprising Strength of Canadian Equities

Mackenzie Investments' PMs Will Aldridge and Tim Johal on Market Resilience, Energy Opportunity, and Bank Fortitude

In the May 8, 2025 episode of The Invested,¹ Rajan Bansi, Head of Portfolio Construction at Mackenzie Private Wealth, sits down with portfolio managers Will Aldridge and Tim Johal to dissect the post-election investment landscape in Canada. With a Mark Carney-led minority government now in place, the trio explore how markets are reacting, where opportunities lie, and how Canada’s banks, energy producers, and resource exporters are positioning themselves in a world shifting away from U.S. dependency. The conversation is candid yet constructive—focused on resilience, re-calibration, and realistic optimism.

Markets React with a Shrug: Post-Election Sentiment

The immediate reaction from financial markets following Canada’s federal election? Largely uneventful. Tim Johal, Lead Manager of the Mackenzie Canadian Dividend Fund, summarizes it plainly:

“If you look at the reaction of capital markets... they're actually relatively muted.”

This restraint, Johal explains, is due to three factors: Carney’s extended lead in the polls gave markets time to adjust, the inherent uncertainty of a minority government, and a broadly pro-growth platform compared to the outgoing Liberal administration. Still, Johal cautions:

“Minority governments... do put a bit of a wrench in trying to achieve a policy objective... and a two-year window isn't a very long timeframe.”

In other words, investors are in “wait-and-see” mode, unsure whether Carney’s ambitious agenda—especially in infrastructure and energy—will materialize before another election cycle is triggered.

Canadian Equities: A Resilient but Overlooked Opportunity

Aldridge was equally pragmatic when asked to gauge investor sentiment toward Canadian equities. While acknowledging the difficulty of pinning down sentiment in such a noisy environment, he emphasizes a surprising shift:

“It’s been a number of years for Canadians to look at Canadian stocks and say, you know, there's a great opportunity here.”

Canada’s lack of a tech sector has long caused domestic investors to chase U.S. exposure. But Aldridge sees renewed favor for Canadian sectors like gold, energy, and banking—sectors that “skated through” recent macro turbulence more gracefully than expected.

“The banks have held in reasonably well... people are looking past some of the near-term noise and saying in the long run... the opportunity for Canada we think is great.”

Management Tone: Diversification and ‘Bypassing the Middleman’

With earnings season in full swing, both Aldridge and Johal stress the importance of management guidance, not just bottom-line results. Aldridge was particularly intrigued by Canadian companies shifting focus away from the U.S.:

“CP Rail... thinking about opportunities to drive incremental business between Canada and Mexico... bypassing the middleman.”

This pivot suggests Canadian corporates are finally responding to external shocks (like tariffs) with strategic diversification—a trend Aldridge views as both overdue and healthy:

“Not to be crude about it, but we need a bit of kick in the butt.”

Energy Complex: From Global Demand to Canadian Hesitation

Johal delivers the most impassioned remarks on Canada’s energy sector, especially its vast but underutilized natural gas reserves. He laments that while the U.S. now exports LNG from six terminals (with ten more at various stages), Canada has yet to ship its first load:

“Canada still doesn’t have an LNG terminal functioning... we have vast natural gas resources in Western Canada. And quite honestly, the rest of the world needs our natural gas.”

He urges a shift in mindset—from focusing on domestic emissions to emphasizing the global benefit of displacing dirtier fuels abroad:

“How much will the rest of the world reduce their greenhouse gas emissions by burning our natural gas... is really how we need to think of it.”

Still, regulatory hurdles remain the key roadblock. Johal points to the long permitting timelines under Bill C-69:

“On average under the Trudeau government [it] was about five years... if you’re a company allocating tens of billions, five years is far too long.”

Carney’s promise to cut that to one or two years is welcome, but as Johal notes, “regulation has to change,” or capital will stay on the sidelines.

The Banks: Steady Hands in a Murky Environment

Bank valuations are in the "middle ground" right now, says Aldridge, but the big question is around provisioning for loan losses. There’s a bifurcation among investors: some are looking beyond the next two quarters, while others are wary of rising PCLs (provisions for credit losses).

Johal, who oversees large bank positions himself, echoes this sentiment with nuance:

“We always think about that reward-to-risk profile... as the risk increased in the economic environment... our outlook for near-term bank earnings also waned.”

Despite recent profit-taking, Johal is not bearish. He reaffirms confidence in the Canadian housing market:

“We do not have an oversupply of housing units in Canada... there’s far more demand for housing than there are units available.”

And while reduced immigration targets may temper future demand, Johal notes:

“After four years... new Canadians have the same homeownership rate as a Canadian.”

In short, the mortgage books are sound, housing remains structurally undersupplied, and banks are well-positioned to weather short-term turbulence.

A Measured Optimism

In his closing remarks, Aldridge strikes a balanced tone:

“Canada tends to be a little bit slower, a little bit steadier, but dependable... and we don’t see any change in that.”

More importantly, he sees renewed drive from corporate Canada:

“What I’m seeing and what we’re hearing from management companies is that they are ready... the opportunities are there... and I think it’s going to take Canada to the next level.”

Aldridge and Johal’s thoughts reflect a broader thesis: while Canada may lack the headline-grabbing sectors of the U.S. market, its structural strengths—resource wealth, resilient banks, and global export potential—are finally being recognized and recalibrated. The domestic equity market, long overshadowed, may now be getting its moment in the sun—not with explosive growth, but with steady, grounded opportunity.

Footnote:

1 Mackenzie Investments. "The Resilience of Canadian Equities: Opportunities and Challenges | The Invested." 8 May. 2025