Q1 2026 Fund Commentary

Commentary and opinions are provided by Fidelity Investments Canada ULC.

Market commentary

Global equities declined during the first quarter of 2026, while fixed income markets provided modest stability. Markets shifted from expectations of rate cuts and earnings strength toward concerns about inflation risks, higher-for-longer rates and slowing growth. Escalating geopolitical tensions added to inflation pressures, dampened risk appetite and reshaped expectations for global growth.

Major central banks held policy rates steady during the quarter. In Europe, rising energy prices pushed annual inflation back above target in March. The U.S. economy grew at a slower pace than expected, reflecting weaker exports, household spending and investment. U.S. inflation held at roughly 2.4% year over year, while core inflation remained steady at roughly 2.5%. The U.S. Federal Reserve Board held interest rates steady for a second consecutive meeting in March. Six of eleven GICS sectors posted positive returns during the quarter, led by the energy, utilities and materials sectors, while the consumer discretionary and communication services sectors were the main laggards.

Performance

A lower-than-benchmark allocation to and security selection in U.S. equities contributed to performance during the quarter. Security selection in emerging markets equities and an out-of-benchmark allocation to a gold exchange-traded fund also contributed to performance.

At the underlying fund level, Fidelity Emerging Markets Fund. U.S. All Cap Fund and Fidelity Canadian Disciplined Equity Fund contributed to performance.

Security selection in Canadian equities detracted from performance during the quarter. Within the fixed income allocation, a lower-than-benchmark allocation to global investment-grade bonds also detracted from performance. Credit exposures were mixed with minimal net impact, despite credit spread widening.

At the underlying fund level, Fidelity Insights Currency Neutral Fund and Fidelity International Equity detracted from performance.

Portfolio activity

The sub-advisor increased the allocation to Canadian equities and Canadian investment-grade bonds during the quarter. The sub-advisor reduced the allocation to international equities, global investment-grade bonds and emerging markets equities.

Outlook

The sub-advisor observes that global economic activity remains broadly supportive, though the conflict in Iran has introduced an inflation shock that has negatively affected both stocks and bonds, while commodity prices surged. Against this backdrop, the sub-advisor maintains a moderate overweight to equities, expressed primarily through an overweight to Canadian equities where valuations are attractive and commodity exposure is structurally embedded.

The sub-advisor shifted to an overweight in Canadian equities and the Canadian dollar beginning in the third quarter of 2025, reflecting Canada's position as a reliable producer of resources in an environment of heightened geopolitical uncertainty. The sub-advisor believes the period of maximum cyclical pressure is passing as interest rate reset effects fade and commodity-driven capital investment accelerates.

Within fixed income, the sub-advisor maintains an underweight duration, favouring inflation-linked and real assets over traditional investment-grade bonds. The conflict in the Middle East reinforces the sub-advisor's structural view that inflationary shocks, which pressure both equities and bonds simultaneously, may recur as globalization retreats and inflation becomes less anchored. Commodities are held as a hedge against inflationary stress and a source of diversification. Currency positioning reflects a constructive view on the Canadian dollar, as the link between commodity prices and the Canadian dollar is expected to reassert itself amid diverging rate expectations.