Q1 2026 Fund Commentary

Commentary and opinions are provided by Mackenzie Investments.

Market commentary

Canada’s economy navigated a challenging first quarter as trade uncertainty continued to weigh on business confidence and manufacturing activity. Employment fell in January and February before stabilizing in March, when the economy added 14,000 jobs and the unemployment rate held steady at 6.7%. Consumer spending remained cautious, and trade-sensitive industries faced ongoing pressure from tariff uncertainty.

The Bank of Canada held its policy rate at 2.25% at both its January and March meetings, citing moderating inflation and persistent uncertainty in the near-term economic outlook. Canada’s inflation rate eased to 1.8% in February, the softest reading in several months, suggesting that domestic price pressures were well contained ahead of the energy price shock that emerged later in the quarter.

The Canadian equity market outperformed global peers in the first quarter, gaining about 4%. The energy sector was the standout contributor, rising sharply after crude oil prices surged following the outbreak of the conflict in the Middle East and the closure of the Strait of Hormuz in early March. Materials also contributed to gains as gold prices hit a record high of USD$5,589 per ounce in January before pulling back. Broader sectors, including information technology and consumer discretionary, lagged as investors rotated toward commodity-linked names amid rising geopolitical uncertainty.

Performance

An overweight allocation to the energy sector contributed to performance, as did stock selection in the industrials and utilities sectors. Stock selection in Canada also contributed to performance.

Canadian Natural Resources Ltd. contributed to the Fund’s performance. The company reported positive production results during the quarter and continued to lower operating costs at its oilsands operations. The stock rose because of higher oil prices driven by geopolitical conflicts. In the sub-advisor’s view, the company’s focus on operational execution, low leverage and growing shareholder distributions remains attractive. Cenovus Energy Inc. also contributed to the Fund’s performance. The company successfully closed its acquisition of MEG Energy Corp. oilsands assets and reported improved downstream operational performance. Crude oil and refined product prices also rose because of geopolitical tensions, which benefited the stock.

Both allocation and stock selection in the materials sector detracted from performance. Stock selection in the information technology and financials sectors also detracted, as did stock selection in the U.S.

Imperial Oil Limited, Suncor Energy Inc. and Microsoft Corp. detracted from the Fund’s performance. The Fund’s underweight exposure to Suncor Energy detracted from performance as the stock rose because of higher oil prices and strong operational results. Suncor continues to benefit from its integrated business model, which supports more stable profitability across commodity cycles.

Portfolio activity

In the financials sector, the sub-advisor increased Brookfield Asset Management Ltd., Power Corp. of Canada and Intact Financial Corp. because of an improved reward-to-risk ratio and, for Intact Financial, a strong earnings outlook and defensive earnings mix. The sub-advisor increased Constellation Software Inc. as artificial intelligence (AI) disruption concerns created a buying opportunity the sub-advisor doesn’t believe is warranted. The sub-advisor increased Barrick Mining Corp. based on a constructive view toward future metals prices and the company’s plans to spin out its North American assets. In the energy sector, the sub-advisor increased Keyera Corp. and Suncor Energy Inc. Keyera may benefit from the successful closing of its proposed acquisition of assets from Plains Canada, while Suncor continues to improve its operational performance.

CCL Industries Inc. was sold because the company had less potential to benefit from rising commodity prices, and redirected proceeds to other names in the sector. The sub-advisor reduced Canadian Natural Resources after a strong rally in the quarter but remains overweight the stock. The sub-advisor reduced Alamos Gold Inc. to partially fund other materials sector purchases. The sub-advisor reduced Alimentation Couche-Tard Inc. because the stock had performed well following an investor update and because of concerns about reduced in-store spending from higher gasoline prices. The sub-advisor reduced Rogers Communications Inc. following a strong rally in 2025 because of growing debt levels to fund sports-related transactions and continued concerns about demand growth in the company’s wireless and cable businesses.