Q3 2026 Fund Commentary

Commentary and opinions are provided by Mackenzie Investments.

Market commentary

Canada’s economy grew at a strong pace in the second quarter of 2026 (as reported in the third quarter), expanding at an annualized rate of 3.3% on higher exports, consumer spending and housing activity. Early third-quarter data pointed to slower growth, with economic activity stalling in July before a muted gain in August. The labour market sent mixed signals, adding about 75,000 jobs in July before losing about 42,000 in August, and the unemployment rate settled at 6.4%. Inflation rose to 3.0% in August as gasoline prices climbed amid the renewed conflict in the Middle East.

Trade tensions with the U.S. increased. Canada and the U.S. didn’t reach a trade deal before the late-August deadline, and the U.S. imposed new tariffs on several Canadian goods. Canada responded with matching tariffs on some U.S. goods in early September. The Bank of Canada (BoC) held its policy interest rate steady at 2.25% over the quarter. At its September meeting, the BoC cautioned that new U.S. tariffs and higher oil prices had raised the risk of higher inflation, and it said it was prepared to adjust interest rates as needed.

Canadian bond prices declined in the third quarter as yields rose. The yield on the 10-year Government of Canada bond increased to 3.99% from 3.38%, as higher oil prices raised inflation concerns and a global sell-off in government bonds pushed yields higher. Solid economic growth and persistent inflation left markets wondering whether the BoC might raise interest rates. Corporate bonds outperformed government bonds, and investment-grade credit spreads (the difference in yields between corporate and government bonds with similar maturities) narrowed modestly. Long-term bonds underperformed short-term bonds, while high-yield bond prices increased.

Performance

Government bond exposure contributed to performance, led by provincial bonds, with federal and municipal bonds also lending support. Fixed income futures contributed, helped by interest rate and yield curve effects. Corporate security selection contributed to performance, particularly within communication services and industrials bonds, which helped offset broader weakness in corporate bonds.

Government of Canada (GoC, 2.75%, 2055/12/01), Government of Norway (1.75%, 2027/02/17) and GoC (1.5%, 2031/06/01) contributed to performance.

Corporate bond exposure detracted from performance, particularly within infrastructure, energy and financials bonds. Interest rate shift effects also detracted, especially in corporate bonds, though some yield-curve movements were favourable. Currency forward contracts detracted as well, particularly U.S. dollar forwards.

GoC (3.5%, 2057/12/01), Province of Ontario (3.9%, 2036/06/02) and U.S. Government (2.375%, 2055/02/15) detracted from performance.

Portfolio activity

There were no significant trades during the quarter.