Q2 2026 Fund Commentary

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

Market commentary

After a subdued start to the year, the second quarter saw developed market equities rise 13.9%, supported by a 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. Growth stocks outperformed value stocks.

Performance

An underweight allocation to energy and telecommunications contributed to performance. Stock selection in emerging markets and continental Europe also contributed.

SK Hynix Inc., the leading South Korean memory semiconductor manufacturer, contributed to performance. The company delivered strong financial results, driven by AI-related memory demand and favourable pricing, and announced plans for a listing to enhance global investor access. Taiwan Semiconductor Manufacturing Co., Ltd. (TSMC) also contributed, delivering sales growth and margin expansion supported by strong demand for AI and high-performance computing applications. Infineon Technologies AG, a European semiconductor manufacturer specializing in automotive, industrial and AI power solutions, contributed as well, benefiting from AI demand, cyclical recovery and order backlog momentum, supported by the opening of its Dresden Smart Power Fab.

Stock selection in technology (semiconductors and hardware) and stock selection and an overweight allocation in financial services detracted from performance. Stock selection in the U.S. and stock selection and an overweight allocation in the Pacific Rim also detracted.

Advanced Micro Devices, Inc. detracted from performance. The sub-advisor's underweight position weighed on returns as the company delivered strong revenue and earnings growth, driven by data centre demand and expanding AI infrastructure opportunities. An underweight position in Samsung Electronics Co., Ltd. also detracted, as the company delivered record financial results driven by memory demand and launched industry-first HBM4 products. NextEra Energy, Inc., the U.S.-based utility and renewables developer, detracted after positive financial results failed to offset regulatory uncertainty and debate around its merger deal with Dominion power.

Portfolio activity

The sub-advisor added Micron Technology, Inc., the U.S.-based semiconductor firm specializing in storage solutions. The firm reported record quarterly results driven by structural AI demand, persistent industry supply shortages and multi-year customer agreements that provide visibility and margin durability.

Broadcom Inc., the U.S.-based firm focused on semiconductor and infrastructure software solutions, was increased on strong financial results, accelerating AI semiconductor growth and strategic long-term agreements with major customers.

The sub-advisor sold Münchener Rückversicherungs-Gesellschaft AG (Munich Re), the Germany-based reinsurance firm, following weak first-quarter earnings that highlighted concerns around a soft pricing cycle in property and casualty reinsurance and weaker top-line performance.

Ecolab Inc., the U.S.-based water and hygiene solutions provider, was reduced because of persistent commodity cost pressures and near-term earnings dilution from the CoolIT acquisition, a costly move into data centre cooling.

Outlook

The Fund ended the period 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 the health care and financials sectors, and overweight the consumer discretionary and information technology sectors. The Fund is overweight companies classified as Premium or Quality, in the sub-advisor's view, and favours superior businesses that are believed to have greater control over their trajectories.

Equity markets have remained resilient despite economic and geopolitical developments in 2026. In the sub-advisor's view, the key question is whether recent optimism can be sustained given geopolitical uncertainty, evolving monetary policy and elevated valuations in parts of the market. The sub-advisor's base case is that Middle East tensions gradually de-escalate and that the broader economic impact remains manageable.

Corporate earnings expectations continue to strengthen globally, supported by investment spending in AI infrastructure and supportive fiscal policy in several regions.

The sub-advisor remains constructive on the long-term opportunity in AI but believes the next phase may be shaped more by company-specific winners and losers than broad market leadership. The sub-advisor continues to focus on bottom-up stock selection.