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. 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. The conflict in the Middle East in late February drove oil prices sharply higher and raised concerns about economic growth across developed and emerging markets alike.

Major central banks held rates steady during the quarter. In Europe, rising energy prices pushed inflation back above the 2.5% target in March. The U.S. economy grew at a slower pace than expected, reflecting weaker exports, consumer spending and business investment. U.S. inflation remained at roughly 2.4% year over year, with core inflation steady at roughly 2.5%. The U.S. Federal Reserve Board held interest rates steady for a second consecutive meeting in March, acknowledging that inflation progress is expected to continue but more slowly than hoped. Energy prices were expected to push up overall inflation, and some of the oil price shock was expected to appear in core inflation. 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

An underweight allocation to the financials sector and a lack of exposure to the communication services sector contributed to performance during the quarter.

Samsung Electronics Co. Ltd. contributed to performance, supported by continued strength in artificial intelligence (AI) chip demand. Komatsu Ltd. also contributed to performance because of strong demand in the metals and mining industry.

An overweight allocation to the consumer discretionary sector and a lack of exposure to the energy sector detracted from performance during the quarter.

Prosus N.V. detracted from performance, partly because of weakness in its stake in Tencent Holdings Ltd. Humana Inc. detracted from performance following lower-than-expected Medicare Advantage rates.

Portfolio activity

There were no notable trades made in the Fund during the quarter.

Outlook

The sub-advisor continues to monitor changes to the strategic position of the Fund and material trends, events and uncertainties that could affect performance. The sub-advisor has been finding attractive opportunities in the Chinese consumer space and believes the emergence of Chinese multinationals has been an attractive area of opportunity. The sub-advisor has also been looking at companies that could benefit from a broader reacceleration in Europe. Some of these opportunities include companies in the construction, homebuilding and infrastructure spaces.