With June behind us, Calgary is enjoying beautiful summer weather, a welcome relief after June's rains. The Calgary Stampede spirit has swept through town, and we wish you a wonderful summer with family and safe travels if you're heading away.

Market Overview

Geopolitical de-escalation and accelerating artificial intelligence investment dominated Q2 market movements. While Middle East tensions remain fluid, oil prices have retraced significantly from April highs, providing meaningful relief to inflation data. Daily price swings reflect headline-driven "risk on/risk off" sentiment, yet markets are increasingly dismissing daily headlines and focusing on fundamentals.

North American equities navigated mixed signals: resilient earnings offset geopolitical uncertainty and shifting monetary policy. Large-cap stocks held steady, while volatility persisted in other segments. For Canadian investors with USD-denominated exposure, currency fluctuations warrant continued monitoring as we move forward.

Growth stocks significantly outperformed value throughout the period. Technology and small-cap equities delivered particularly strong returns as investors favored companies providing AI infrastructure and tools. This trend reflects broader market optimism around artificial intelligence's transformative potential and its near-term earnings impact. Bond markets remained range-bound, with modest gains as credit spreads tightened on robust corporate earnings, though the outlook for inflation and growth remains uncertain.

Earnings & Dividend Strength

Earnings growth has accelerated in line with these market developments, providing a solid foundation for equity returns. Canadian investors with exposure to U.S. large-cap equities have particularly benefited from strong corporate profitability, supported by cost relief and steady consumer demand.

Dividend growth continues to be a bright spot: we've secured 23 dividend increases across our North American portfolio year to date, with 10 increases in the second quarter alone. Importantly, 3 of our Canadian banks announced dividend increases for Q3 2026, underscoring management confidence and the quality of our core holdings. This steady cadence of payout increases, particularly within financial services and energy sectors, reflects not only strong earnings but also disciplined capital allocation by our portfolio companies.

Portfolio Performance & Positioning

We're very pleased with portfolio returns year to date and, importantly, the composition of those returns. Most client portfolios are at all-time highs at the mid-year mark, and this momentum certainly provides confidence in achieving long-term financial objectives.

We've maintained balanced positioning across our holdings while selectively rebalancing where valuations have risen above target weights, notably in the energy and financial sectors of our Canadian holdings. This disciplined approach reflects our commitment to maintaining appropriate diversification and managing risk as valuations fluctuate.

Our dividend-focused strategy continues to provide dual benefits: steady, reliable income and a meaningful margin of safety during periods of market uncertainty. The strength of earnings across most holdings is supportive of further dividend raises and share price appreciation, and we expect this trend to persist in the near term.

Looking Ahead

While Middle East de-escalation is certainly encouraging, the situation remains fluid and warrants continued monitoring. Our base case expects limited lasting economic damage from recent conflicts, with growth engines normalizing through 2027. AI capex spending continues to underpin market optimism and drive corporate profitability; a trend we believe has further legs.

The path forward presents both opportunities and risks. Persistent inflation concerns, shifting monetary policy, and geopolitical developments could create volatility. However, we remain confident in our long-term positioning and the quality of our holdings.

Closing Thoughts

Even as we enjoy some well-deserved time this summer, we remain actively engaged in mid-year portfolio reviews with all our valued clients. These conversations have been notably productive. We remain committed to a long-term investment perspective and encourage you to reach out with any questions regarding your portfolio positioning or market outlook.

Thank you for entrusting us with your financial future. We're grateful to be part of your family's success and look forward to navigating 2026's remainder together.

Have a wonderful summer.