Q2 2026 Fund Commentary

Commentary and opinions are provided by Fidelity Investments Canada ULC.

Market commentary

Global equities advanced strongly during the second quarter of 2026, supported by resilient corporate earnings, continued enthusiasm around artificial intelligence (AI) investments and improving investor risk appetite. Gains were accompanied by renewed inflation and growth concerns, as Middle East tensions, higher energy prices and rising bond yields contributed to a period of volatility.

Globally, central banks generally maintained a cautious policy stance as persistent inflation pressures and energy-market volatility delayed the path toward easing monetary policy. The European Central Bank and the Bank of Japan were notable exceptions, with both raising policy interest rates during the quarter in response to renewed inflation risks. In China, policymakers introduced additional measures to support growth amid softer domestic demand.

The U.S. economy grew at an annualized rate of 2.1% in the first quarter of 2026, rebounding from 0.5% growth in the fourth quarter of 2025. Despite the pickup in economic activity, prices remained elevated, with headline inflation rising 4.2% year over year in May and core inflation rising 2.9%. The unemployment rate stood at 4.2% in June 2026. At its June meeting, the U.S. Federal Reserve Board (Fed) held the federal funds rate unchanged in a range of 3.50% to 3.75%, maintaining a cautious stance amid persistent inflation pressures. New Fed Chair Kevin Warsh struck a more hawkish tone, with policymakers’ projections shifting toward the possibility of rate hikes rather than cuts.

By quarter-end, 10 of the 11 GICS sectors posted positive returns, led by information technology, industrials and financials, while energy lagged.

Performance

Micron Technology Inc. contributed to the Fund’s performance. The company’s shares rose following strong AI-driven memory demand and record fiscal third-quarter revenue, supported by nearly 50% sequential growth in high-bandwidth memory revenue and record data-centre sales. NVIDIA Corp. also contributed to performance as investors remained optimistic about accelerating AI infrastructure spending and demand for its AI chips, with continued adoption of the Blackwell platform and ongoing data-centre investment by major technology companies supporting sentiment. Alphabet Inc. contributed to performance as investors responded positively to the company’s AI initiatives and cloud-computing business momentum, supported by growth in AI-related cloud-computing services and the rollout of new AI features across its Google Search division.

An allocation to the information technology sector contributed to performance. An allocation to the financials sector also contributed, led by holdings in Affirm Holdings Inc. and State Street Corp. From a regional perspective, investments in the U.S. and Europe contributed to performance.

Intuit Inc. detracted from the Fund’s performance. The company’s shares declined as investors reacted to weaker-than-expected performance in the company’s do-it-yourself tax business and concerns about increasing competition from AI-driven tax preparation solutions. Sentiment was further affected by a lower outlook for the company’s TurboTax revenue growth.

Portfolio activity

There were no significant changes made to the Fund’s portfolio during the period.

Outlook

In the sub-advisor's view, the investment strategy remains focused on identifying underappreciated earnings and free-cash-flow growers with strong long-term business models and competitive advantages. While acknowledging uncertainty around policy outcomes, the sub-advisor remains focused on how businesses are positioned to manage disruptions and emerge stronger. Many leading technology and consumer companies, in the sub-advisor’s opinion, continue to demonstrate competitive advantages and resilient earnings potential. Amid economic uncertainty, the sub-advisor remains focused on profitable companies with above-average growth prospects, attractive valuations and exposure to long-term secular trends, while using market volatility to add high-conviction businesses at attractive prices.

A separate sleeve of the Fund is anchored in capital preservation and downside protection through periods of market volatility. While investor sentiment remains constructive as equity markets advance, the sub-advisor emphasizes the persistent disconnect between market strength and underlying fundamentals, with valuations across many areas leaving limited room for disappointment. Against that backdrop, the strategy is positioned defensively, emphasizing stable, cash-generative businesses in overlooked areas such as consumer staples, communication services, health care and utilities.

Within the Fund’s growth sleeve, the sub-advisor continues to lean into long-duration secular growth, with AI at the core of the thesis as companies accelerate investment across the value chain. In the sub-advisor’s view, the most compelling opportunities are within infrastructure and semiconductor leaders with durable competitive advantages. Connected television remains a key theme, supported by the steady migration of advertising budgets toward digital platforms.