Q2 2026 Fund Commentary

Commentary and opinions are provided by JPMorgan Asset Management (Canada) Inc..

Market commentary

After a subdued start to the year, developed market equities rose 13.9% in the second quarter of 2026, supported by a risk-on rally in April and continued optimism into May, before momentum softened in June as investors paused after record enthusiasm around artificial intelligence (AI). Geopolitics and technology continued to dominate market movements, and growth stocks outperformed value stocks.

Performance

Stock selection in the consumer discretionary and industrials sectors and an underweight allocation in industrials contributed to the Fund’s performance. From a regional perspective, stock selection in Continental Europe and emerging markets contributed to performance.

Tokyo Electron Ltd., a Japanese semiconductor production equipment manufacturer, contributed to performance. The company delivered record sales and net income, supported by strong demand for advanced logic and memory applications, and the company’s stock rallied further following a share buyback and stock split announcement. Infineon Technologies AG, a European semiconductor manufacturer specializing in automotive, industrial and AI power solutions, contributed to performance because of strong AI demand, improving cyclical recovery and sustained order backlog momentum, alongside the opening of its Dresden Smart Power Fab. Siemens AG, a European industrial and technology conglomerate, contributed to performance because of order growth and margin expansion in the company’s Smart Infrastructure and Digital Industries divisions.

Stock selection in the communication services and financials sectors and an underweight allocation in financials detracted from the Fund’s performance. From a regional perspective, stock selection in Japan and the U.K. and an overweight allocation in the U.K. detracted from performance.

Kioxia Holdings Corp., the Japanese NAND flash memory manufacturer, detracted from the Fund’s performance. The company delivered solid results driven by AI-related demand and tight supply, and the company’s stock rallied on ongoing long-term agreement negotiations, weighing on the Fund’s underweight position in the company. Murata Manufacturing Co. Ltd., a Japanese passive components maker with strong MLCC market share, also detracted from performance on an underweight position in the Fund, as the company benefited from AI server demand, improved margins and favourable pricing. Shell PLC, a global integrated energy company, detracted from performance because of reduced shareholder distributions and geopolitical disruptions affecting production and working capital.

Portfolio activity

The sub-advisor added Keyence Corp., the Japanese manufacturer of factory automation and inspection systems, because the firm is delivering accelerating growth and profitability. The sub-advisor increased Continental AG, the German tires and industrial solutions firm, because of strong execution across its Tires and ContiTech divisions and resilient margins. The sub-advisor sold Nintendo Co. Ltd. because of a lack of near-term catalysts and pressure on hardware margins. The sub-advisor reduced Taiwan Semiconductor Manufacturing Co. Ltd. to manage the Fund’s overweight position in semiconductor companies.

Outlook

The Fund ended the quarter with underweight exposures to the Pacific Rim and continental Europe, and overweight exposures to the U.K. and emerging markets. At the sector level, the Fund was underweight in the health care and financials sectors and overweight in the consumer discretionary and information technology sectors. The Fund is currently overweight in companies classified as either Premium or Quality. In the sub-advisor’s view, emphasizing superior businesses with greater control over their own trajectories could be important in the year ahead.

In the sub-advisor’s view, the key question for markets over the remainder of the year is whether recent optimism can be sustained given ongoing geopolitical uncertainty, evolving monetary policy and elevated valuations. The sub-advisor’s base case is that geopolitical tensions gradually de-escalate and the broader economic impact remains manageable. The 493 non-Magnificent Seven companies in the S&P 500 Index are forecast to grow 24.9% over 2026 versus 11.2% in 2025. Emerging markets are forecast to see 65.5% earnings growth over 2026, supported by AI supply chain demand in Taiwan and South Korea; Japan is forecast at 17.8%, supported by improvements in corporate governance and capital efficiency; and Europe is forecast at 11.8%, supported by fiscal stimulus and stabilization in key industries.

The sub-advisor remains constructive on the long-term opportunity presented by AI but believes the benefits aren’t yet being realized equally across companies, so the next phase of the AI investment cycle could be characterized more by company-specific winners and losers. The sub-advisor continues to emphasize bottom-up stock selection.