Q2 2026 Fund Commentary

Commentary and opinions are provided by AGF Investments Inc..

Market commentary

The second quarter of 2026 was a period of recovery for U.S. equities, which rallied sharply as market leadership swung decisively back to growth and technology, more than reversing the first quarter's decline.

Crude oil, which had spiked early in the quarter following the Middle East conflict, fell sharply as the conflict de-escalated and a U.S.-Iran agreement reopened the Strait of Hormuz in mid-June. Inflation kept climbing lagging energy prices passed through to consumers. Longer-term yields stayed elevated. The reacceleration of the artificial intelligence (AI) investment cycle was the defining feature of the quarter, with the information technology sector (semiconductors and semiconductor equipment in particular) leading decisively. The U.S. Federal Reserve Board (Fed) held its policy rate steady but adopted a more hawkish posture, and the energy, defensive and materials sectors lagged.

Performance

Security selection was the largest contributor to performance, led by stock selection in the information technology sector contributed as the AI investment cycle reaccelerated. Security selection in the financials sector also contributed to performance. Underweight allocations to the financials and consumer staples sectors contributed to performance.

Applied Materials Inc. contributed to performance, advancing as AI-related capital spending reaccelerated. Advanced Micro Devices Inc. contributed to performance because of strong demand tied to the AI investment cycle. Micron Technology Inc. also contributed to performance on improving memory pricing and AI-related demand.

An overweight allocation to the energy sector detracted from performance as oil prices fell. An underweight allocation to the information technology sector, the market's strongest sector, also detracted from performance. Security selection in the materials sector detracted from performance, and the Fund's cash position was a modest detractor in a rising market.

L3Harris Technologies Inc. detracted from performance, declining amid profit-taking and a consolidation in defence companies. SLB Ltd. detracted from performance, falling alongside softer oil prices and pressure on near-term energy activity. Walmart Inc. also detracted from performance, retreating as investors favoured higher-growth areas and weighed tariff-related cost pressures.

Portfolio activity

The sub-advisor added ServiceNow Inc., Marvell Technology Inc., Nucor Corp., Eaton Corp. plc, Dell Technologies Inc., Monster Beverage Corp., Viking Holdings Ltd., CoreWeave Inc., Johnson & Johnson and Illumina Inc. The sub-advisor sold Royal Caribbean Cruises Ltd., Newmont Corp. and AbbVie Inc.

Outlook

In the sub-advisor's view, the Fund remains anchored in large-capitalization U.S. companies with durable competitive advantages, strong balance sheets and the ability to compound earnings across a range of economic environments. The sub-advisor continues to hold high-conviction positions across the AI value chain while balancing that exposure with well-managed businesses less correlated with the AI cycle, including industrials, energy and power-and-grid companies, health care innovators, and select consumer franchises, so returns aren't overly dependent on a single theme.

In the sub-advisor's view, key risks that could reintroduce volatility include a possible reckoning with AI valuations, uncertainty around Fed policy while inflation stays above target, the durability of the earnings cycle, and geopolitical developments. The Fund remains disciplined in assessing valuation against long-term fundamentals.