Q1 2026 Fund Commentary

Commentary and opinions are provided by Beutel, Goodman & Company Ltd..

Market commentary

The first quarter of 2026 started with volatility across global equity and fixed income markets. Conflict in the Middle East escalated in late February, pushing energy prices sharply higher and raising inflation concerns. Canadian equities gained roughly 3.9% during the quarter, while U.S. equities declined roughly 2.6% in Canadian-dollar terms. International equities gained roughly 0.6% in Canadian-dollar terms. Canadian investment-grade bonds returned roughly 0.23%, as rising yields late in the quarter offset earlier gains.

Performance

Within the Canadian equity sleeve, overweight allocation and selection within the utilities and communication services sectors contributed to performance. Within the U.S. equity sleeve, overweight allocation and selection within the industrials sector and selection within the consumer discretionary and health care sectors contributed to performance. Within the international equity sleeve, overweight allocation and selection within the energy sector and selection within the consumer discretionary and health care sectors contributed to performance. Within the fixed income sleeve, duration positioning and a mid-curve overweight contributed to performance, along with government bond selection and corporate bond selection in the energy sector.

Wabtec Corp. contributed to performance after reporting strong freight rail results, including 18% revenue growth, double-digit earnings-per-share growth and a 24% dividend increase. Merck & Co. Inc. contributed to performance because fiscal year 2025 results came in ahead of expectations. Applied Materials Inc. contributed to performance because of strong quarterly results and increased forward guidance.

Within the Canadian equity sleeve, overweight allocation to the industrials and real estate sectors detracted from performance. Within the U.S. equity sleeve, overweight allocation and selection within the consumer staples sector and a zero-weight allocation to the energy sector detracted from performance. Within the international equity sleeve, overweight allocation and selection within the industrials and information technology sectors detracted from performance. Within the fixed income sleeve, sector allocation detracted from performance as an overweight to corporate bonds underperformed during the period.

Gen Digital Inc. detracted from performance because of growing concerns that artificial intelligence could disrupt the consumer software industry. Qualcomm Inc. detracted from performance because of a weaker near-term handset outlook, though the sub-advisor believes the company's automotive and data centre businesses could provide longer-term growth. Amdocs Ltd. detracted from performance because of revenue issues and the announced retirement of the company's CEO.

Portfolio activity

Within the equity sleeve, the sub-advisor added Gildan Activewear Inc., Union Pacific Corp., Sysco Corp., Wells Fargo & Co., Becton Dickinson and Co., Marsh & McLennan Companies Inc. and Danone S.A. The sub-advisor also increased Boyd Group Services Inc., Brookfield Asset Management Ltd., Canadian Apartment Properties Real Estate Investment Trust, Colliers International Group Inc., Element Fleet Management Corp., NetApp Inc., Amdocs Ltd., Qualcomm Inc., Elevance Health Inc., The Magnum Ice Cream Co. (from Unilever PLC), Euronext N.V. and Nippon Telegraph and Telephone Corp..

The sub-advisor sold Harley-Davidson Inc., Campbell's Co. and Versant Media Inc. The sub-advisor also reduced Bank of Montreal, Canadian Natural Resources Ltd., Franco-Nevada Corp., Nutrien Ltd., TC Energy Corp., Amgen Inc., Heidelberg Materials AG, Shionogi & Co. Ltd., DBS Group Holdings Ltd., GSK plc, SMC Corp., RB Global Inc., Kimberly-Clark Corp., Applied Materials Inc., Omnicom Group Inc., Merck & Co. Inc., Ameriprise Financial Inc., Gen Digital Inc., American Express Co., The Carlyle Group Inc., Chubb Ltd., Konecranes Oyj and Infineon Technologies AG.

Outlook

The sub-advisor maintains moderate equity performance expectations given less accommodative monetary policy and ongoing geopolitical and trade uncertainty. Commodity prices may remain supportive for the Canadian market. The sub-advisor continues to focus on high-quality businesses purchased at reasonable valuations.

Within the fixed income sleeve, the sub-advisor believes the environment has become increasingly complex and volatile. The Middle East conflict, renewed geopolitical risk, inflation uncertainty and elevated oil prices could weigh on fixed income markets. The sub-advisor's positioning balances caution with flexibility to respond as conditions evolve.