Q1 2026 Fund Commentary

Commentary and opinions are provided by Mackenzie Investments.

Market commentary

Canada’s economy navigated a challenging first quarter as trade uncertainty continued to weigh on business confidence and manufacturing activity. Employment fell in January and February before stabilizing in March, and the unemployment rate held steady at 6.7%. The Bank of Canada held its policy rate at 2.25% at both its January and March meetings as Canada’s inflation rate eased to 1.8% in February.

The Canadian fixed income market delivered mixed results in the first quarter as geopolitical uncertainty and rising oil prices complicated the investment landscape. The yield on the 10-year Government of Canada bond rose from 3.43% at the start of the quarter to 3.47% by quarter-end, reaching a high of 3.58%, putting downward pressure on government bond prices, particularly late in the quarter. Corporate bonds showed resiliency, but underperformed government bonds with credit spreads widening slightly. High-yield bonds were relatively volatile as the late-quarter decline in risk appetite weighed on lower-rated issuers, though energy-linked names broadly outperformed.

The Canadian equity market outperformed global peers in the first quarter, gaining about 4%. The energy sector rose substantially as the Strait of Hormuz closure in early March drove crude oil prices above USD$110 per barrel near the end of the quarter. Materials also contributed, supported by a record gold prices early in the quarter. Broader sectors including information technology and consumer discretionary lagged as investors rotated toward commodity-linked names amid the geopolitical uncertainty.

Performance

From an equity perspective, an underweight allocation to and stock selection within the information technology sector contributed to performance during the quarter. Canadian equity holdings also contributed to performance. Taiwan Semiconductor Manufacturing Co. Ltd., Agnico Eagle Mines Ltd. and Johnson & Johnson were among the largest individual contributors during the period.

From a fixed income perspective, corporate bonds in the energy sector contributed to performance because of spread tightening.

Stock selection in the communication services sector detracted from equity performance. From a country perspective, stock selection in the Netherlands detracted from performance. CRH plc, ARC Resources Ltd. and SAP SE were among the largest individual detractors during the period.

Corporate bonds in the communication services sector detracted from fixed income performance.

Portfolio activity

The sub-advisor added Government of Canada (3.00%, 2027/02/01) during the quarter to align exposure with asset allocation objectives.

Government of Canada (3.25%, 2035/06/01) was reduced to align with the Fund’s duration and asset allocation objectives. The sub-advisor also reduced Province of Ontario (3.60%, 2035/06/02) as part of a switch trade within the provincial curve, rotating exposure to higher-yielding bonds while maintaining overall Ontario provincial bond exposure.