Q1 2026 Fund Commentary

Commentary and opinions are provided by Mackenzie Investments.

Market commentary

The U.S. economy started 2026 on a positive note, with consumer spending and business investment providing support through January. Sentiment shifted in late February after the outbreak of the conflict in the Middle East, and equity markets reversed sharply in March as rising oil prices raised concerns about inflation and potential economic softening.

The U.S. Federal Reserve Board held the federal funds rate steady at 3.50%–3.75% at both its January and March meetings, maintaining a pause in its rate-cutting cycle as policymakers assessed the economic impact of higher energy costs alongside a still-resilient labour market. The unemployment rate ranged between 4.3% and 4.4% throughout the quarter, ending March at 4.3%.

U.S. small- and mid-capitalization equities outperformed the broad U.S. equity market in the first quarter, with the Russell 2000 Index rising about 1%. While the large-cap index declined as technology and growth-oriented stocks sold off, smaller companies benefited from comparatively modest exposure to mega-capitalization technology names. Energy and materials companies contributed positively as commodity prices rose. Industrials held up, supported by ongoing domestic manufacturing investment, while consumer-oriented and select technology companies delivered mixed results.

Performance

Stock selection in the information technology sector and an underweight allocation to the financials sector contributed to performance.

Cognex Corp. contributed to performance as investor sentiment improved around a cyclical recovery in industrial automation, with added support from expectations that artificial intelligence-enabled manufacturing and machine vision adoption could drive a stronger demand environment. Generac Holdings Inc. also contributed to performance on growing optimism around its expansion opportunity in data centre backup power, as investors recognized the company’s ability to participate in rising power resiliency needs tied to digital infrastructure buildouts.

Stock selection in the industrials sector detracted from performance.

CoStar Group Inc. detracted from performance as the market remained concerned about AI-related disruption risk, while spending associated with Homes.com continued to weigh on sentiment despite the underlying strength of the company’s core property data and information business.

Portfolio activity

The sub-advisor added Liberty Energy Inc. and Innovative Solutions and Support Inc. during the quarter.

Energy Services of America Corp. and Paymentus Holdings Inc. were increased.

Varex Imaging Corp. was sold.

Universal Display Corp. and Forum Energy Technologies Inc. were reduced.