Q2 2026 Fund Commentary

Commentary and opinions are provided by Fidelity Investments Canada ULC.

Market commentary

Global equities advanced strongly over the second quarter of 2026, supported by resilient corporate earnings, continued enthusiasm around artificial intelligence (AI)-related 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 periods of volatility.

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 raised their policy interest rates during the quarter in response to renewed inflation risks. In China, policymakers introduced additional measures to support economic 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. Headline inflation rose 4.2% year over year in May, and core inflation rose 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 at a range of 3.50% to 3.75%. Ten of the 11 GICS sectors posted positive returns, led by information technology, industrials and financials, while energy lagged.

Performance

Out-of-benchmark exposure to SK Hynix Inc. contributed to the Fund’s performance. The company advanced as continued investment in AI infrastructure supported strong demand for high-bandwidth memory, with tight industry supply and improving memory chip pricing reinforcing expectations for continued earnings growth. Overweight exposure to Micron Technology Inc. contributed to performance, as AI-driven memory chip demand and disciplined industry supply growth supported improving pricing, particularly in higher-value memory products. Overweight exposure to Intel Corp. contributed to performance, as improving execution against its foundry roadmap and growing confidence in its position within the AI and advanced semiconductor ecosystem supported a recovery in investor sentiment.

In equities, investments in and overweight exposure to the information technology sector and investments in and underweight exposure to the communication services sector contributed to performance. In fixed income, security selection among investment-grade bonds contributed to performance, as did out-of-benchmark exposure to high-yield bonds and floating-rate bonds.

Underweight exposure to Advanced Micro Devices Inc. detracted from the Fund’s performance, as the company’s stock advanced on continued AI infrastructure investment and improving confidence in the company’s competitive positioning within AI computing. Out-of-benchmark exposure to Agnico Eagle Mines Ltd. detracted from performance, as gold equities came under pressure following a period of strong outperformance. Out-of-benchmark exposure to Canadian Natural Resources Ltd. detracted from performance, as energy prices moderated from earlier highs and geopolitical risk premiums eased.

In equities, investments in and overweight exposure to the materials and energy sectors detracted from performance.

Portfolio activity

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

Outlook

In the sub-advisor’s view, AI remains the Fund’s highest-conviction investment theme, with confidence continuing to strengthen as enterprise adoption accelerates and commercially viable use cases become increasingly evident. The sub-advisor believes AI has moved beyond infrastructure spending alone, with investments generating tangible productivity gains, and that demand for AI infrastructure (including compute, memory, storage and networking) could remain supported over the long term.

Within the AI ecosystem, the Fund is positioned toward businesses enabling the continued expansion of computing infrastructure. The sub-advisor remains selective within large-capitalization technology companies and maintains a cautious stance toward software companies. Outside of AI, exposure to gold-related investments has been reduced following a period of strong performance, with capital reallocated toward businesses where improving fundamentals present more attractive long-term opportunities, including select financials. Geographically, the Fund continues to selectively broaden exposure outside the U.S., where businesses benefiting from technology investment and AI-related demand trade at more attractive valuations than comparable U.S. peers.

In fixed income, the sub-advisor assesses the U.S. economy as being in a mid-cycle expansion, with stable labour market conditions and limited recession risks. Inflation may remain sticky in the near term before moderating gradually. Broad credit valuations are viewed as relatively unattractive, with investment-grade and high-yield spreads near expensive levels. The sub-advisor emphasizes patience and selective risk-taking, should more compelling credit opportunities emerge.