Q1 2026 Fund Commentary

Commentary and opinions are provided by Beutel, Goodman & Company Ltd..

Market commentary

Canadian equities entered 2026 at elevated valuations following a strong 2025. The market reached an all-time high in early March before pulling back sharply after conflict broke out in the Middle East in late February. Energy was the strongest-performing sector during the quarter, benefiting from rising oil prices as the conflict disrupted supply through the Strait of Hormuz. Sector dispersion was notable, with more than 50 percentage-points separating the best- and worst-performing sectors. The U.S. equity market declined during the quarter, and software stocks came under particular pressure as investors reassessed competitive dynamics around artificial intelligence (AI).

Performance

Within the Canadian equity sleeve, an underweight allocation to the information technology sector and selection within the financials sector contributed to performance. Within the U.S. equity sleeve, selection and an overweight allocation to the industrials sector and selection within consumer discretionary contributed to performance.

Suncor Energy Inc. contributed to performance because of solid operating fundamentals and rising oil prices driven by the Middle East conflict. Canadian Natural Resources Limited also contributed to performance for similar reasons. Nutrien Ltd. contributed to performance because nitrogen fertilizer prices surged after supply disruptions through the Strait of Hormuz restricted shipments and drove higher natural gas prices in Europe and Asia. Potash pricing was also supportive.

Within the Canadian equity sleeve, an underweight allocation to the energy sector, an underweight allocation to the materials sector and overweight allocation and selection within the industrials sector detracted from performance. Within the U.S. equity sleeve, overweight allocation and selection within consumer staples, an overweight allocation to the financials sector and selection within the information technology sector detracted from performance.

CGI Inc. detracted from performance because of muted organic growth and growing concerns that AI could disrupt the information technology consulting industry. The sub-advisor noted that the company continues to compound earnings at roughly 8.5% through acquisitions and maintains strong free cash flow and a solid balance sheet. Gen Digital Inc. detracted from performance because of AI disruption fears in the software sector. Boyd Group Services Inc. detracted from performance because the recovery in same-store sales remained slower than expected at roughly 2%, versus the sub-advisor's longer-term expectations of 3% – 5%. Rising oil prices also raised concerns about miles driven.

Portfolio activity

The sub-advisor added Gildan Activewear Inc., Union Pacific Corporation, Sysco Corporation, Wells Fargo & Company, Becton Dickinson and Company and Marsh & McLennan Companies Inc. during the quarter. The sub-advisor also increased Boyd Group Services Inc., Brookfield Asset Management Ltd., Canadian Apartment Properties Real Estate Investment Trust, Colliers International Group Inc., Element Fleet Management Corp., NetApp Inc., Amdocs Limited, Qualcomm Incorporated and Elevance Health Inc.

The sub-advisor sold Harley-Davidson Inc., Campbell's Company and Versant Media Inc. The sub-advisor also reduced Bank of Montreal, Canadian Natural Resources Limited, Franco-Nevada Corporation, Nutrien Ltd., TC Energy Corporation, RB Global Inc., Amgen Inc., Kimberly-Clark Corporation, Applied Materials Inc., Omnicom Group Inc., Merck & Co. Inc., Ameriprise Financial Inc., Gen Digital Inc., American Express Company, The Carlyle Group Inc. and Chubb Limited.

Outlook

The sub-advisor maintains moderate performance expectations given less accommodative monetary policy and ongoing geopolitical and trade uncertainty. Commodity prices may remain supportive for the Canadian market in the near term. The sub-advisor continues to apply a long-term quality and value framework, focusing on high-quality businesses purchased at reasonable valuations. The sub-advisor believes this approach may provide resilience through uncertain market conditions.