Semi-Annual Commentary – June 30, 2026

Global equity markets demonstrated remarkable resilience in the first half of 2026, rebounding quickly after the geopolitical turbulence of February and March. As economic data improves and earnings estimates are revised upward, medium-term prospects remain favorable, although certain risk factors warrant close monitoring.

Equity Markets Rebound

The collapse triggered by the Iran conflict and the closure of the Strait of Hormuz was short-lived. The S&P 500, S&P/TSX, Japan's TOPIX, and European markets all reached new highs. Only the UK MSCI index and the Shanghai Composite are lagging.

Earnings Growth Drives the Market

The S&P 500's 9% gain since the beginning of the year stems entirely from upward revisions to earnings estimates. Bloomberg's forecasts for 2026 stand at $344 per share, up 10% since January.

This dynamic reflects not only technology giants and AI, but also growing optimism in the broader U.S. economy. According to Business Roundtable, 81% of surveyed companies expect sales to increase over the next six months. In Canada, 74% of employers plan to increase hiring in the second half of 2026.

The Strait of Hormuz: A Sword of Damocles

While the negotiated truce is encouraging, uncertainty persists. A sustained reopening would eliminate inflationary pressures, reduce prices for oil, fertilizers and chemicals, and provide a welcome boost to household budgets. However, any prolonged delay would extend the risks of intensifying inflation and could prompt central banks to raise rates.

Watch for Corrections

Bond yields risk rising before policy rates do. A coordinated increase in government and corporate bond issuances could compress profit margins and reduce equity valuations. Unless the Fed initiates a cycle of multiple rate hikes, nothing suggests an imminent recession. However, corrections remain possible, particularly in reaction to complications surrounding the Strait of Hormuz.

The S&P 500's forward price-to-earnings ratio of 21x in one year appears reasonable given expected earnings growth of 22% this year and 15% next year. RBC Capital Markets' 12-month target of 8150 remains achievable – albeit the gains more than likely will not come linearly.

Fixed Income and Currencies

Canada. Despite a GDP contraction in Q1, underlying data and household consumption remain solid. We believe the Bank of Canada will maintain the status quo through the end of 2026. Credit spreads remain tight, creating favorable conditions for debt issuances. Alphabet issued $8.5 billion in bonds in May, a record quickly surpassed by Amazon with $14 billion in June.

Currencies. The U.S. dollar is stabilizing thanks to economic resilience and expectations of higher rates. The euro is under pressure due to elevated energy prices, while the Canadian dollar could weaken to around 70 cents USD. Sterling is consolidating around 1.35 £/USD.

2026 Performance

Canadian dollar returns for the six months ended June 30, 2026:

+11.2% – Canadian S&P/TSX Index

+13.9% – U.S. S&P 500 Index (in CAD)

+9.8% – Europe–Asia–Far East Index

+2.2% – FTSE TMX Canadian Bond Universe Index

Portfolio performance: Balanced portfolios returned +7.0% to +8.0% in the first half of 2026.

We are deeply grateful for the trust you place in our team. We wish you a rejuvenating and pleasant summer, and we remain committed to navigating these dynamic markets alongside you.

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Mathieu and Anthony