Q1 2026 Fund Commentary

Commentary and opinions are provided by AGF Investments Inc..

Market commentary

The first quarter of 2026 was challenging for U.S. equities as early-year gains were eroded by conflict-driven inflationary pressures linked to energy shocks and heightened volatility, which triggered risk-off moves across markets.

U.S. gross domestic product growth decelerated to 0.7% in the fourth quarter of 2025, reflecting softer consumption spending alongside contractions in government expenditure and exports. Annual Consumer Price Index inflation remained unchanged at 2.4% in February, underscoring price stickiness. The U.S. Federal Reserve Board paused its monetary easing cycle and held the federal funds rate in the 3.50%–3.75% range at its January and March meetings, emphasizing caution amid mixed labour market signals, elevated inflation and energy-related supply shocks. Disruptions around the Strait of Hormuz drove crude oil prices higher, fuelling higher inflation expectations and contributing to wider credit spreads.

U.S. equities generated negative returns over the quarter as market positioning unwound from the artificial intelligence (AI) growth trade and rotated away from large-capitalization technology companies and toward defensive and commodity-linked exposures. Stocks of companies in the energy, utilities and materials sectors outperformed, supported by rising commodity prices, defensive cash flows and growing power demand. Information technology, consumer discretionary and financials company stocks lagged because of falling valuations, rising logistical costs and profit-taking. Small-capitalization stocks outperformed large-capitalization stocks, and value stocks led growth stocks.

Performance

Corning Inc. contributed to the Fund’s performance, benefiting from investor optimism around AI data centre infrastructure demand and analyst upgrades. Valero Energy Corp. contributed to performance as the company’s shares rallied on expectations of favourable refining economics and the company’s competitive positioning amid global supply disruptions. Applied Materials Inc. contributed to performance as the semiconductor equipment maker benefited from strong demand for AI-driven microchip-making tools and advanced packaging technologies.

Security selection in the information technology and industrials sectors contributed to performance. An overweight allocation to the energy sector also contributed to performance.

Capital One Financial Corp. detracted from the Fund’s performance as investors weighed the company’s announced acquisition and broader concerns about the consumer credit environment. Danaher Corp. detracted from performance after the company announced its acquisition of Masimo Corp., with investors assessing the strategic rationale and integration risks. Robinhood Markets Inc. detracted from performance because of weaker cryptocurrency trading activity, slowing user engagement and analyst downgrades that raised concerns about the stability of the company’s revenue base.

Security selection in the health care, financials and real estate sectors also detracted from performance.

Portfolio activity

The sub-advisor added to the Fund holdings in Southern Copper Corp., Caterpillar Inc., Micron Technology Inc., Newmont Corp., SLB Ltd., Palantir Technologies Inc., Vertex Pharmaceuticals Inc., EQT Corp., LyondellBasell Industries NV, Linde PLC, Coherent Corp., Eli Lilly and Co., GE Vernova Inc., ServiceNow Inc. and Targa Resources Corp.

The sub-advisor sold Fund holdings in Apple Inc., Axon Enterprise Inc., Boston Scientific Corp., CrowdStrike Holdings Inc., PulteGroup Inc., Ulta Beauty Inc., Amphenol Corp., Bank of America Corp., CBRE Group Inc. and Danaher.

Outlook

In the sub-advisor’s view, fiscal expansion and selective deregulation continue to drive capital investment across manufacturing, infrastructure and AI-enabled industries. These dynamics continue to underpin corporate earnings and capacity expansion, though markets are increasingly focused on energy-driven cost pressures, geopolitical uncertainty and elevated concentration within mega-capitalization technology equities. Investors have begun reassessing valuations in mega-capitalization technology company stocks along with adjusting expectations of monetary easing.

Near-term fiscal stimulus may give way to tighter conditions later in the cycle, while elevated energy prices represent a potential challenge for otherwise resilient consumer fundamentals. The sub-advisor believes opportunities remain in areas supported by infrastructure demand, and defence spending remains robust amid heightened geopolitical risk. AI adoption continues to generate measurable productivity gains. The sub-advisor remains focused on earnings durability and momentum and may selectively add exposure to select firms during periods of market dislocation.