Q2 2026 Fund Commentary

Commentary and opinions are provided by Mackenzie Investments.

Market commentary

Canada’s economy stayed under pressure in the second quarter as trade uncertainty continued to weigh on business confidence, though the labour market showed signs of stabilizing. Employment picked up in May, and the unemployment rate eased to 6.6%. Inflation accelerated, with the annual pace rising to 3.2% in May from 2.8% in April, as higher gasoline prices linked to the conflict in the Middle East pushed up energy costs. Core inflation measures held closer to 2%.

The Bank of Canada (BoC) held its policy rate at 2.25% at both its April and June meetings, its fourth and fifth consecutive holds. The BoC said it was looking through the temporary effect of higher energy prices while watching for signs that price pressures were becoming more persistent, and it pointed to risks on both sides from the trade dispute with the U.S. and the energy shock.

The Canadian fixed income market rose over the second quarter. The yield on the 10-year Government of Canada bond eased late in the period, falling below 3.40% by late June, its lowest level in more than three months, as contained core inflation supported expectations that the BoC would leave rates unchanged. Government bond prices firmed as yields declined. Corporate bonds were broadly stable, and energy-sector issuers benefited from firm oil prices early in the quarter. High-yield bond prices were choppy but finished the quarter higher.

Performance

Overweight exposure to Canadian corporate bonds contributed to performance because of their coupon income and solid earnings. Their additional yield helped to offset volatility in government bonds.

Canadian government bond futures positioning detracted from performance. Changing inflation and interest rate expectations led to higher volatility across the government bond yield curve.

Portfolio activity

ARC Resources Ltd. (3.465%, 2031/03/10) was added for its Montney assets, cash generation and manageable debt. Shell PLC’s proposed acquisition of it improved future creditor support. Province of Alberta (2.05%, 2030/06/01) was increased for its duration (interest rate sensitivity). Despite a weaker budget outlook, Alberta has a lower debt burden and higher economic capacity, supporting its longer-term credit quality.

Royal Bank of Canada (5.01%, 2033/02/01) was sold after strong share price performance. The Bank of Nova Scotia (2.62%, 2026/12/02) was reduced as the bond approached maturity. Proceeds were redeployed into securities with greater income or capital-appreciation potential, while maintaining diversified exposure to Canadian financial issuers.