Q4 2025 Fund Commentary

Commentary and opinions are provided by Mackenzie Investments.

Market commentary

North American economies showed mixed signals in the fourth quarter. Canada remained pressured by U.S. tariffs, and labour?market softness became more visible as 2025 ended. In the U.S., activity stayed resilient despite the record?long government shutdown. Consumer demand and AI?related spending continued to support growth, although hiring slowed.

Monetary policy turned more supportive in 2025 and continued in the fourth quarter. The Bank of Canada held its policy rate at 2.25% in December following a 25-basis-point rate (“bps”) cut in October. The U.S. Federal Reserve Board delivered two more 25 bps interest rate cuts over the fourth quarter, bringing the federal funds target range to 3.50%–3.75%. Canada’s unemployment rate rose to 6.8% in December, while the U.S. rate was 4.4%.

Equity markets in both countries rose. The S&P/TSX Composite gained, with materials sector strength offsetting a softer energy sector. The S&P 500 Index also advanced as earnings held up. Market leadership began to widen, with more defensive companies improving while information technology and communication services remained influential. Lower oil prices weighed on energy shares.

Performance

In equities, stock selection in the communication services and consumer discretionary sectors contributed to the Fund’s performance. Overweight allocations to Aritzia Inc. and Amazon.com Inc. contributed to performance as these companies performed well.

Stock selection in the information technology sector detracted from the Fund’s performance. An overweight allocation to Microsoft Corp. detracted from performance as the company underperformed.

In fixed income, corporate bonds contributed to the Fund’s performance, while government bonds detracted from performance.

Portfolio activity

Fund holdings in Waste Connections Inc. and Constellation Software Inc. were increased.

The sub-advisor believes the stock of Waste Connections was unusually weak given modest challenges and flow of funds out of defensive industrials toward artificial intelligence (AI)-related businesses, yet the business continues to execute well. The sub-advisor increased the holding in Waste Connections meaningfully, viewing the current environment as an attractive opportunity to build exposure to a high-quality, defensive compounder at a favourable valuation.

Constellation Software is a consolidator of niche, mission-critical software businesses. The company’s stock has been one of the best compounders in Canadian history, in the sub-advisor’s view. In 2024, concerns that AI would lower barriers to entry for software development caused broad-based weakness in the software sub-sector. The sub-advisor believes the company has a more nuanced view that separates broad-brush narrative from on-the-ground reality. In the sub-advisor’s view, Constellation Software operates in many small markets that don’t tend to attract many new entrants. The sub-advisor also believes the cost to the customer is low and the risk of switching is high. According to the sub-advisor, AI risk looks different than headlines suggest and opportunistically added to the Fund’s holding in Constellation Software as a result.