Q2 2026 Fund Commentary

Commentary and opinions are provided by Mackenzie Investments.

Market commentary

The U.S. economy expanded at a solid pace in the second quarter, supported by resilient consumer spending and business investment. The labour market changed little, and the unemployment rate held broadly steady. Inflation stayed well above the U.S. Federal Reserve Board’s (Fed) 2% target, partly because of higher energy costs tied to the conflict in the Middle East.

The Fed held the federal funds rate steady at a target range of 3.50%–3.75% at its June meeting, keeping its interest rate-cutting cycle on pause. Fed officials adopted a more hawkish tone, and their latest projections pointed to the possibility of interest-rate increases later in the year rather than cuts, as they focused on returning inflation to target.

The U.S. equity market rallied in the second quarter, with the S&P 500 Index gaining about 15%, one of its strongest quarters in years. Semiconductor stocks were strong contributors, rising more than 70% on demand tied to artificial intelligence (AI) infrastructure. The gains came despite elevated valuations and a more cautious interest-rate outlook. The largest mega-capitalization technology stocks lagged the broad market and were little changed for the year, as investors questioned the timing of returns on heavy AI spending.

Performance

Stock selection in the financials and industrials sectors contributed to performance, as did underweight exposure to communication services.

The Fund’s exposure to KLA Corp., Cisco Systems Inc. and Hewlett Packard Enterprise Co. contributed to performance. KLA Corp. benefited from rising advanced chip demand amid the AI infrastructure buildout. Cisco Systems reported networking demand, including stronger AI infrastructure orders. Hewlett Packard saw rising demand across its cloud and AI divisions as well as in networking.

Underweight exposure to the information technology sector and overweight exposure to the energy sector detracted from performance. Stock selection in information technology and consumer discretionary detracted.

Lack of exposure to Micron Technology Inc., Advanced Micro Devices Inc. and Intel Corp. detracted from performance, as did exposure to Expand Energy Corp. Semiconductor companies, Micron, Advanced Micro Devices and Intel, benefited from AI-related memory and computer hardware demand. Expand Energy was affected by natural gas price volatility.

Portfolio activity

The sub-advisor added Jabil Inc., Union Pacific Corp. and CME Group Inc. to the Fund. Edwards Lifesciences Corp., CVS Health Corp., Eaton Corp. PLC, Southern Copper Corp., Amazon.com Inc. and Ralph Lauren Corp. were increased. The sub-advisor also increased Hewlett Packard Enterprise Co., Alphabet Inc., NVIDIA Corp., Apple Inc., NextEra Energy Inc. and Caterpillar Inc.

Genuine Parts Co., Take-Two Interactive Software Inc., United Rentals Inc. and Royal Caribbean Cruises Ltd. were sold. Several holdings were reduced, including AbbVie Inc., AT&T Inc., The Home Depot Inc., Emerson Electric Co., JPMorgan Chase & Co., Parker Hannifin Corp. and Bristol-Myers Squibb Co. Other reductions were Bank of America Corp., Gilead Sciences Inc., Citigroup Inc., Eli Lilly and Co., RTX Corp., Mastercard Inc., Exxon Mobil Corp., Microsoft Corp., among others.