Q2 2026 Fund Commentary

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

Market commentary

Against a backdrop of easing tensions in the Middle East, resilient corporate earnings and the support of the artificial intelligence (AI) investment cycle, U.S. equities staged a meaningful recovery in the second quarter of 2026. Energy, which had led in the prior quarter, gave way to a resurgent information technology sector, led by semiconductor and hardware companies.

Canadian equities delivered another strong quarter. Performance was led by financials, as the banks continued to benefit from solid earnings supported in part by strength in capital markets and wealth management. Energy detracted as oil prices retreated to roughly USD$70 per barrel, largely reversing the geopolitical risk premium that had built earlier, because of improving prospects for a U.S.-Iran ceasefire agreement and optimism around a potential reopening of the Strait of Hormuz. Materials was the weakest-performing sector.

Performance

In the Canadian equity component, underweights in the materials and energy sectors contributed to the Fund’s performance. In the U.S. equity component, stock selection in consumer discretionary and a zero weighting in energy contributed to performance. In fixed income, duration was roughly neutral. Yield curve positioning contributed because of an overweight in the mid-term part of the curve, which outperformed. Corporate security selection contributed because of short- and mid-term corporate bonds, which outperformed longer-term corporate bonds.

The Toronto-Dominion Bank, NetApp Inc. and QUALCOMM Inc. contributed to performance. The Toronto-Dominion Bank beat expectations with accelerating return on equity and strong operating leverage, driven by momentum in its wholesale and wealth divisions alongside disciplined expense growth. NetApp Inc. reached all-time highs on strong fiscal fourth-quarter results, with year-over-year revenue and earnings per share growth of 12% and 26%, respectively, because of AI storage demand and 500 AI deals closed in the quarter. Qualcomm Inc. appreciated on a major AI data centre win with a hyperscaler customer, signalling a credible entry into that market.

In the Canadian equity component, stock selection in the industrials and consumer discretionary sectors detracted from the Fund’s performance. In the U.S. equity component, stock selection and overweights in financials and health care, detracted from performance.

Boyd Group Services Inc., Amdocs Ltd. and Rogers Communications Inc. detracted from performance. Boyd Group Services Inc. detracted as same-store sales growth came in below market expectations, although margins improved. Amdocs Ltd. guided below consensus and continues to face concerns over AI disruption in software. Rogers Communications Inc. weakened alongside peers following reports that SpaceX is exploring a direct-to-consumer wireless offering and mobile partnerships with U.S. cable operators.

Portfolio activity

Intact Financial Corp., AutoZone Inc. and Royal Caribbean Cruises Ltd. were added. The sub-advisor increased Brookfield Corp., Canadian Natural Resources Ltd., Franco-Nevada Corp., Metro Inc., Suncor Energy Inc., Becton, Dickinson and Co., Cencora Inc., Flowserve Corp., Marsh & McLennan Cos. Inc., Masco Corp. and Union Pacific Corp.

Open Text Corp. was sold. The sub-advisor reduced AltaGas Ltd., Manulife Financial Corp., Royal Bank of Canada, Sun Life Financial Inc., TC Energy Corp., George Weston Ltd., Cummins Inc., NetApp Inc., Wabtec Corp., Amgen Inc., Applied Materials Inc., Comcast Corp., eBay Inc., Elevance Health Inc., Gen Digital Inc., Kimberly-Clark Corp., Merck & Co. Inc., Omnicom Group Inc. and Sysco Corp.

Outlook

The S&P/TSX Composite Index has been anchored by strong financials performance, in the sub-advisor’s view, while the quarter saw leadership rotate away from energy and materials. As geopolitical and trade uncertainties persist, broader equity market performance could depend on whether bank valuations can be sustained as well as the trajectory of commodity prices.

In the sub-advisor's view, with the S&P 500 Index trading at a forward price-to-earnings ratio of over, the index embeds execution risk and leaves a limited margin of safety. Concentration adds to embedded risks, with the top 10 holdings accounting for over 36% of the index and technology and tech-adjacent businesses representing over 50%.

The sub-advisor believes that a research process focused on identifying high-quality stocks trading at discounts to their intrinsic value, combined with a long-term horizon, could lead to smoother portfolio outcomes over time. The portfolio is comprised of resilient, high-quality businesses and shows defensive qualities.