Q1 2026 Fund Commentary

Commentary and opinions are provided by Capital Group Companies Inc.

Market commentary

Global equity markets during the first quarter of 2026 were shaped by heightened geopolitical risk and rising energy prices. An escalation of conflict in the Middle East disrupted oil supplies, contributing to higher inflation expectations and renewed concerns around global economic growth. Equity markets in the U.S. and Europe declined over the quarter, while Canadian and Japanese equities ended the quarter higher.

Central banks responded cautiously to the shifting environment. The U.S. Federal Reserve Board paused its monetary easing cycle, citing persistent inflation and energy-related supply pressures. Other major central banks signalled that accommodative conditions could persist, though rising commodity prices complicated the inflation outlook. Currency movements were notable during the quarter, with the Canadian dollar weakening against several major currencies while appreciating modestly against the euro.

Sector performance reflected these dynamics. Energy stocks rose sharply alongside higher crude oil prices, while utilities also performed well as investors gravitated toward more defensive areas of the market. In contrast, growth-oriented sectors such as consumer discretionary, communication services and information technology came under pressure because of valuation concerns and weaker sentiment around artificial intelligence-related spending.

Performance

Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC) contributed to the Fund’s performance. The company’s shares rose following solid quarterly results, supportive demand trends and an increase in the company’s quarterly dividend. Canadian Natural Resources Ltd. contributed to performance, benefiting from rising crude oil prices amid supply concerns and stronger-than-expected earnings. SK Hynix Inc. contributed to performance as the company’s shares advanced on improving memory chip demand and a favourable outlook.

Security selection in the information technology sector contributed to performance. Exposure to energy and materials-related companies also supported results as higher commodity prices improved sentiment toward these areas of the market. Country allocation to Taiwan, Canada and the U.K. also contributed to performance, reflecting strong results in select markets tied to technology, energy and defence spending.

Flutter Entertainment PLC detracted from the Fund’s performance because of increased competition in online gaming and sports betting. Broadcom Inc. detracted from performance following a pullback after strong share price appreciation in the prior year. MercadoLibre Inc. detracted from performance after quarterly earnings missed expectations, reflecting margin pressure from increased investment spending.

Stock selection in the health care and consumer discretionary sectors detracted from performance. Exposure to the financials sector also detracted from performance amid broader macroeconomic uncertainty that weighed on investor sentiment toward the sector.

Portfolio activity

The sub-advisor increased the Fund’s holdings in Samsung Electronics Co. Ltd., Shell PLC, Netflix Inc., 3i Group PLC and Microsoft Corp.

The sub-advisor reduced the Fund’s positions in TSMC, SK Hynix, Broadcom, Micron Technology Inc. and Lonza Group AG.

Outlook

The sub-advisor remains focused on identifying companies with durable business models, strong competitive positioning and attractive long-term growth potential across global markets. While geopolitical uncertainty, inflation pressures and energy market dynamics may continue to influence market sentiment, the Fund remains selectively positioned across sectors and regions.

The sub-advisor continues to emphasize bottom-up security selection and diversification across investment styles and geographies. The sub-advisor believes that a disciplined, research-driven approach may help navigate the current environment of elevated uncertainty. No changes were made to the Fund’s investment objective or management structure during the quarter.