Market Overview - Canadian equities advanced in Q3, with the S&P/TSX Composite Total Return Index increasing by 12.5%, reaching an all-time high [2] - Seven of the eleven GICS sectors set new records, including energy, materials, industrials, consumer discretionary, consumer staples, financials, and utilities [2] - The U.S. dollar rose 2.3% against the Canadian dollar to $1.39 USD/CAD, although it remains down 3.2% year-to-date [3] Economic Context - Canada's economy showed modest improvement in July, with GDP growth affected by high unemployment and low inflation [4] - The Bank of Canada and the Federal Reserve both cut rates, with the Bank of Canada lowering rates to 2.50% to stimulate housing and consumption [4] Sector Performance - On an absolute return basis, 10 of 11 GICS sectors increased in Q3, with materials (+37.8%), IT (+13.2%), and energy (+12.6%) being the best performers [5] - Weakness in industrials was noted, particularly in Canadian railways, which faced pressure from softer shipping volumes and trade uncertainty [9] - Energy sector performance was mixed, with volatility in crude oil and natural gas prices, ending at $62.37/bbl and $3.30/mmbtu respectively [6] Strategy Performance - The ClearBridge Canadian Equity Strategy underperformed the benchmark in Q3, primarily due to cyclical exposure in materials [8] - Financials were the best contributors to the Strategy's performance, with strong selection benefiting from not owning underperforming stocks [12] Portfolio Positioning - The Strategy's largest sector exposures were in financials, industrials, and energy, with an underweight in materials and financials [18] - Trading activity increased, with selective exposure to out-of-favor cyclical stocks and trimming of defensive sectors [14] Corporate Actions - Several corporate actions occurred, including Parkland Corp.'s acquisition by Sunoco LP and MEG Energy's unsolicited bid from Strathcona Resources [13] - Teck Resources and Anglo American agreed to a merger, creating a global mining leader with significant copper exposure [13] Outlook - Canadian equity markets continued to show strength, supported by resilient corporate earnings amid global dynamics [19] - Investor sentiment remains cautious but resilient, with macro headwinds and political risks increasingly priced into expectations [19]