. As we move through the first quarter of 2026, we are writing to provide an update on the current market environment. While the year began with a focus on a structural economic shift in Canada, the past week has introduced a layer of geopolitical complexity that we are monitoring closely.

The recent U.S. military action in Iran has created expected volatility, with oil opening 7% higher on Monday. While the situation in Tehran remains fluid, the primary market concern is the security of the Strait of Hormuz. Even if the waterway remains physically open, the threat of asymmetric tactics—drones, mines and missiles—may drive up insurance costs and deter shipping. Historical data reminds us to stay grounded: since WWII, the S&P 500 has been higher 12 months after the start of a conflict 65% of the time which is consistent with the market’s muted reaction to the news.

Back at home, the Canadian market is reacting to the implementation of the 2025 Budget. As the Carney government’s capital-focused measures take hold, we see a clear tailwind for the industrial and engineering sectors. Your positions in Toromont, WSP Global and Brookfield remain core to our strategy – these firms are uniquely positioned to execute the large-scale infrastructure projects demanded by the current fiscal path.

Furthermore, trade remains a dominant theme. In recent discussions with RBC Chief Economist Frances Donald, it is clear that CUSMA extension talks will lead the headlines this year. Last year, nearly 90% of Canadian exports to the U.S. remained tariff-exempt due to CUSMA compliance, and maintaining this stability is vital for domestic confidence.

We are witnessing a broadening of the market in general. Over the last year we saw the Magnificent Seven lead the way for market growth. This year, we are encouraged to see market strength coming from a more diverse group of companies. We have used this positive momentum as an opportunity to rebalance your overall portfolio.

Our focus remains centered on three themes. First, we are prioritizing companies that can self-fund their growth through strong and consistent cash flow. Second, with global trade tensions persisting, we have maintained our exposure to North American energy infrastructure, which continues to provide both defensive stability and attractive yields. Finally, we are moving beyond the "chip makers" to favor the "implementers," companies using automation and advanced technologies to address labor productivity challenges facing the broader economy.

While geopolitical uncertainty is a constant, the fundamental strength of your portfolio lies in the quality of the underlying businesses. We are not chasing "hype," but are staying committed to established leaders with proven balance sheets. Corporate resilience remains the cornerstone of our outlook