Q2 2026 Fund Commentary

Commentary and opinions are provided by Mackenzie Investments.

Market commentary

The global economy steadied in the second quarter after the energy shock that dominated the start of the year. Crude oil prices stayed high through much of the quarter before retreating late in the period as tensions in the Middle East eased and shipping through the Strait of Hormuz began to resume. The pullback in oil lowered input costs for energy-importing economies and helped cool fears of a broader inflation shock.

Major central banks stayed cautious. The U.S. Federal Reserve Board (Fed) and the Bank of Canada both kept interest rates unchanged, and the Fed signaled that rate increases were possible later in the year. The European Central Bank raised its policy interest rates at its June meeting in response to rising inflationary pressures.

Global fixed income markets delivered mixed results in the second quarter. Government bond yields rose in the U.S. as the market priced in the possibility of Fed rate increases, putting downward pressure on bond prices, while Canadian yields eased late in the quarter on contained inflation. Investment-grade corporate bonds showed greater resilience, with energy-sector issuers benefiting from firm oil prices early in the period. High-yield bonds were mixed. Emerging market bonds in oil-importing economies improved as crude prices retreated late in the quarter.

Performance

Government bond positioning contributed to performance. Duration (interest rate sensitivity) exposure to U.S. and German government bonds contributed to performance as yields fell and prices rose.

Japanese government bond exposure detracted. Exposure to Japan government bonds detracted from performance as rising long-term Japanese yields pressured its price, with extended duration worsening its underperformance. Yields rose amid persistent inflation, reduced Bank of Japan purchases, fiscal concerns and weak demand at super-long Japanese government bond auctions.

Portfolio activity

U.S. Government (1.125%, 2030/10/15) was added to the Fund to add high-quality duration and liquidity in addition to potential capital appreciation. Government of Brazil (10%, 2029/01/01) was increased to capture attractive real yields, supported by lower inflation and the potential for monetary easing.

Government of Australia (1%, 2030/12/21) was sold as the bond offered less compelling value, with higher domestic inflation and uncertainty around the timing of monetary easing. Government of Mexico (0%, 2027/12/23) was reduced to realize gains and manage country exposure. Lower inflation and anticipated monetary easing were reflected in valuations, reducing the position’s potential return.