Q2 2026 Fund Commentary

Commentary and opinions are provided by Mackenzie Investments.

Market commentary

Canada’s economy stayed under pressure in the second quarter as trade uncertainty continued to weigh on business confidence, though the labour market showed signs of stabilizing. Employment picked up in May, and the unemployment rate eased to 6.6%. Inflation accelerated, with the annual pace rising to 3.2% in May from 2.8% in April, as higher gasoline prices linked to the conflict in the Middle East pushed up energy costs. Core inflation measures held closer to 2%.

The Bank of Canada (BoC) held its policy rate at 2.25% at both its April and June meetings, its fourth and fifth consecutive holds. The BoC said it was looking through the temporary effect of higher energy prices while watching for signs that price pressures were becoming more persistent, and it pointed to risks on both sides from the trade dispute with the U.S. and the energy shock.

The Canadian fixed income market rose over the second quarter. The yield on the 10-year Government of Canada bond eased late in the period, falling below 3.40% by late June, its lowest level in more than three months, as contained core inflation supported expectations that the BoC would leave rates unchanged. Government bond prices firmed as yields declined, while corporate bonds were broadly stable.

Canadian equities advanced in the second quarter. The S&P/TSX Composite Index climbed to a record high in June, extending its gain for the year to about 10%. The energy sector was a standout early in the quarter as crude oil prices stayed elevated, and most sectors ended higher. The Materials sector was down as gold prices retreated sharply after their earlier record run. Market leadership broadened as the quarter progressed and oil prices eased.

Performance

Stock selection in communication services contributed to performance, as did exposure to Taiwan. Exposure to Lam Research Corp., Alphabet Inc. and Taiwan Semiconductor Manufacturing Co. Ltd. contributed to the Fund’s performance.

Stock selection in information technology and financials detracted, as did selection in the U.S. Overweight exposures to CME Group Inc., Agnico Eagle Mines Ltd. and Motorola Solutions Inc. detracted from performance.

Within fixed income, exposure to government bonds, particularly Canadian federal bonds, contributed to performance, supported by longer duration (interest rate sensitivity) and yield curve positioning. Exposure to corporate bonds, particularly in communication services, detracted from performance, due to yield curve positioning and security selection.

Portfolio activity

The sub-advisor added Government of Canada (GoC, 3.5%, 2057/12/01), GoC (3.25%, 2036/06/01) and U.S. Government (2.375%, 2055/02/15). These were added to adjust duration and yield curve exposure. GoC (3%, 2027/02/01) was increased to adjust short-term government bond exposure.

Province of Ontario (4.6%, 2055/12/02) was sold while GoC (2.75%, 2055/12/01) and GoC (3.25%, 2035/06/01) were reduced. These transactions were made to adjust federal and provincial bond exposures.