Q1 2026 Fund Commentary

Commentary and opinions are provided by AGF Investments Inc..

Market commentary

The first quarter of 2026 was challenging for global equities. Early-year gains were largely eroded by resurgent inflationary pressures linked to energy demand shocks and elevated volatility, which led to risk-off movements toward quarter-end.

U.S. gross domestic product (GDP) growth was 0.5% in the fourth quarter of 2025, amid softer consumption spending and contractions in government expenditure and exports. Annual Consumer Price Index inflation rose to 3.3% in March, driven by higher energy costs. The U.S. Federal Reserve Board paused its monetary easing cycle and held its federal funds rate steady because of mixed labour market signals, elevated inflation and uneven energy supply dynamics stemming from the Middle East conflict. Disruptions around the Strait of Hormuz drove up crude oil prices during the quarter, leading to higher inflation expectations.

Eurozone GDP growth decelerated to 0.2% in the final quarter of 2025, and the European Central Bank held its refinancing rate at 2.15%. Canada also held its policy interest rate steady, despite an output contraction in the fourth quarter of 2025 because of a business inventory drawdown and a mismatch between rising imports and modest export gains. China achieved its annual growth target, supported by accelerating industrial production and a rising trade surplus. Japan experienced steady economic growth and cooling inflation.

Global equities declined over the quarter because of intense volatility in energy markets, supply chain disruptions and a market rotation out of mega-capitalization company stocks late in the quarter. The energy, utilities and materials sectors outperformed, supported by rising commodity prices, defensive cash flows and growing power demand. The consumer discretionary, financials and information technology sectors lagged because of decreased valuations, rising logistical costs and profit-taking. Small-capitalization stocks outperformed large-capitalization stocks, and value stocks led growth stocks.

Performance

Samsung Electronics Co. Ltd. contributed to the Fund’s performance, benefiting from improving artificial intelligence (AI) memory pricing, customer validation and a new product launch. Northrop Grumman Corp. contributed to performance, supported by strong earnings visibility, accelerating production and rising global defence-spending expectations amid heightened geopolitical tensions. TJX Cos. Inc. contributed to performance.

Security selection in the consumer discretionary and industrials sectors contributed to performance. An overweight allocation to the energy sector and an underweight allocation to the information technology sector also contributed to performance.

Microsoft Corp. detracted from the Fund’s performance because of concerns about the company’s investment spending and the uncertainty of when AI would have a positive impact on earnings. The Williams Cos. Inc. detracted from performance. Visa Inc. detracted from performance because of concerns that potential caps on credit card interest rates could result in lower business volumes.

Security selection in the materials and energy sectors detracted from performance. No allocation to the utilities sector and an overweight allocation to the financials sector also detracted from performance.

Portfolio activity

The sub-advisor did not make any changes to the Portfolio during the quarter.

Outlook

In the sub-advisor’s view, U.S. equity markets are supported by domestic economic resilience, deregulation and innovation. However, valuations are elevated, and geopolitical uncertainty has increased, which may raise inflation and further reduce the spending power of lower-income earners. The macroeconomic backdrop suggests a year of moderate returns.

The sub-advisor believes U.S. economic growth may remain positive during the year, and the economy could continue to be resilient. Consumer spending by the upper-income cohort remains strong, while labour markets appear to be cooling but don’t appear to be failing. European equities may present attractive upside potential based on valuation and earnings. Japanese and Chinese equities could continue to attract global investment because of their growth potential, despite persistent structural challenges. The sub-advisor remains focused on constructing a portfolio of high-quality businesses with strong competitive advantages and may look to take advantage of volatility-driven dislocations.