Q3 2025 Fund Commentary

Market commentary

Strong quarterly earnings and third-quarter growth expectations supported U.S. equity market gains in the third quarter of 2025. The U.S. Federal Reserve Board’s (Fed) interest-rate cut and optimism around artificial intelligence (AI) investment supported investor confidence. Macroeconomic indicators, including inflation and labour market data, led investors to shift expectations on Fed policy and economic growth. Uncertainty about the impact of U.S. trade and fiscal policies weighed on investor sentiment.

Large-capitalization information technology and AI-related stocks led market gains, despite some pullbacks over concerns that the AI trade had become overheated. Information technology and communication services were the top-performing sectors, with all sectors except consumer staples rising. From a style perspective, growth stocks outpaced their value counterparts amid AI-driven enthusiasm. At a market-cap level, all segments recorded positive returns with small-capitalization stocks outperforming mid- and large-capitalization stocks.

The Fed lowered its policy rate in September and signaled there could be further monetary easing to balance inflation risks against a softer labour market. The S&P 500 Index returned 8.1% in U.S. dollar terms and 10.3% in Canadian dollar terms.

Performance

The Fund’s overweight exposure to Western Digital Corp., NVIDIA Corp. and The Bank of New York Mellon Corp. contributed to performance. Western Digital reported positive earnings growth because of demand for hard disk drives amid expansion of cloud infrastructure and AI applications. NVIDIA’s stock rose because of better-than-expected earnings growth amid data centre demand and AI deals. Bank of New York Mellon posted better earnings-per-share and revenue growth than expected.

Overweight exposure to MarketAxess Holdings Inc., ServiceNow Inc. and Marsh & McLennan Cos. Inc. detracted from performance. MarketAxess reported better earnings than expected but rising competitive pressures led its shares to fall. ServiceNow, despite revenue and profit growth, was affected by intensifying competition in AI workflows and reliance on enterprise spending amid broader macroeconomic pressures. Marsh & McLennan reported strong earnings but its stock reflects the pressures faced by the industry.

Portfolio activity

There were no transactions during the quarter.

Outlook

The sub-advisor expects that high-quality companies with idiosyncratic drivers should perform best, and as such, that’s where the Fund’s emphasis lies. The sub-advisor will rely on their fundamental research expertise in uncovering investment opportunities throughout the U.S. stock market, spanning both sectors and the market-capitalization spectrum.