DIARY OF A PORTFOLIO MANAGER 

August 17, 2026

“Time stand still
I’m not looking back 
But I want to look around me now
See more of the people
And the places that surround me now”

Time Stand Still, RUSH

So, I had a rather cool experience lately.  Your trusty investment advisor was in Toronto for meetings  - and a couple concerts -  and I saw RUSH on the opening night of their four-night Toronto / hometown shows. What made it more special was the company – my Uncle who introduced me to the band in the 1970s.  Two cousins who were excited as I was about the band in the 1980s and a friend of theirs that I’ve known 40 years and attended many concerts with.

Many aspects stood out but one of the most was during the song “Time Stand Still” and the video montage behind the band.  Their drummer who was a crucial part of the band, and their lyricist, passed away in 2020.  Earlier on, he faced a couple personal tragedies and he did an extensive motorcycle tour of North and South America (books are written about this adventure) to clear his head.  The video shown was of a motorcycle with no rider heading into parts unknown.

I first witnessed this song live in 1988 in Montreal and thought it was about reflecting on the past but it’s not about that at all (my 17 year old brain got it wrong).  It’s about enjoying the present and what is happening now.  Live in the present.  Enjoy where and who you are.  What a message.  It made me think about investing and how much time is spent regretting what has already happened and worrying about what may happen in the future (and usually doesn’t occur anyway).  Actually, this applies to many things in life not just investing.  Full song lyrics below at the end of this note.  

Now, back to business.  The economic and earnings outlook remains constructive, though several risks warrant continued attention. 

Economic Growth Holding Up

The global economy continues to prove resilient in the face of a volatile macro backdrop. Business activity readings have rebounded from recent lows, consumer confidence surveys have improved, and steady wage gains have supported household spending. Barring a significant weakening in these trends, we believe the environment should remain supportive of corporate earnings and growth-sensitive assets.

There are, however, several uncertainties that warrant attention. Oil prices remain a key source of both growth and inflation risk, particularly given the recurring “escalate, de-escalate” pattern in the Middle East. We are also watching whether the substantial investment in AI can translate into tangible productivity gains and returns on capital. 

Equities Move Higher

Global equities traded within a relatively narrow range between May and July as investors digested commodity price volatility, rising bond yields and share price weakness in AI-related companies. The pullback was particularly pronounced among tech hardware companies—semiconductors and memory-chip producers—whose earnings have benefited tremendously from the surge in AI infrastructure spending, as the sustainability of that spending came under greater scrutiny. 

Importantly, the correction in the AI investment theme did not translate into a broader equity market correction. As noted in our previous letter, market leadership has continued to broaden across sectors and regions, while corporate results have remained generally strong. This has helped major equity indexes absorb periods of AI-specific volatility.

More recently, markets have regained upward momentum, with U.S. and Canadian equities, along with broad global equity indexes, at or near record levels. Strong earnings have been an important catalyst. With the bulk of Q2 reporting season complete, companies have broadly delivered against elevated expectations across major markets. 

Recent results from large tech companies have also provided further evidence that demand for computing capacity remains robust. This has helped ease some concerns about the durability of AI-related capital spending and supported a rebound in technology equities. Questions about the sustainability of AI spending are likely to linger. 

The interest-rate backdrop has also become less worrisome. A weaker-than-expected July employment report reduced expectations for a Federal Reserve hike in September, while July’s consumer inflation was in line with expectations. 

Inflation Eases Bond Yield Pressures

U.S. consumer prices increased at a relatively modest pace in July, rising incrementally from the month prior but decelerating on an annual basis. Energy prices were an important contributor to this improvement, with the year-over-year rate of energy inflation falling to 14.7% from a peak of 23.5% in May. 

U.S. bond yields are still meaningfully higher today compared to the start of the year but have recently shown signs of stabilization. Attention will now turn to the August inflation data for evidence that the recent moderation is becoming more durable.

Given the current level of starting yields across fixed income markets, we believe mid-single digit returns over the next 12 months represent a reasonable expectation for a diversified fixed income portfolio.

Takeaways

Despite considerable volatility over the past year, financial markets have continued to generate worthwhile returns for investors. The combination of an expanding economy and growing corporate profits, bolstered by resilient consumer spending and sustained business investment, suggest the outlook remains constructive.  If I sat you down on January 1 2025 and told you all of the headlines that one would see over the next 18 months, you would likely have followed a different investment path and been very wrong. 

At the same time, full valuations in select markets, uncertainty around inflation and the potential for rapid shifts in sentiment toward the AI theme continue to reinforce the importance of maintaining adequate diversification. As a risk management tool, we also believe it is sensible to periodically review portfolios for rebalancing opportunities to ensure allocations do not drift too far from long-term strategic targets.   Raising a bit of cash into recent strength is our current mindset.

Should you have any questions, please feel free to reach out.

FULL LYRICS BELOW.  WHAT ARE YOUR THOUGHTS?

Music: Geddy Lee and Alex Lifeson
Lyrics: Neil Peart

I turn my back to the wind
To catch my breath,
Before I start off again.
Driven on
Without a moment to spend
To pass an evening
With a drink and a friend

I let my skin get too thin
I’d like to pause,
No matter what I pretend
Like some pilgrim —
Who learns to transcend —
Learns to live
As if each step was the end

Time stand still —
I’m not looking back —
But I want to look around me now
See more of the people
And the places that surround me now

Freeze this moment
A little bit longer
Make each sensation
A little bit stronger
Experience slips away…

I turn my face to the sun
Close my eyes,
Let my defences down —
All those wounds
That I can’t get unwound

I let my past go too fast
No time to pause —
If I could slow it all down
Like some captain,
Whose ship runs aground —
I can wait until the tide
Comes around

Make each impression
A little bit stronger
Freeze this motion
A little bit longer
The innocence slips away…

Summer’s going fast–
Nights growing colder
Children growing up —
old friends growing older
Experience slips away…

Todd Kennedy

J. Todd Kennedy, CIM, FCSI | Senior Portfolio Manager | Kennedy Wealth Management | RBC Dominion Securities Inc. | Phone: 613-566-4582 | Cell: 343-961-3820 | Toll Free: 800-461-1958 | World Exchange Plaza | 45 O’Connor St. Suite 900, Ottawa, ON K1P 1A4 | http://www.toddkennedy.ca

Disclosures

This information is not investment advice and should be used only in conjunction with a discussion with your RBC Dominion Securities Inc. Investment Advisor. This will ensure that your own circumstances have been considered properly and that action is taken on the latest available information. The information contained herein has been obtained from sources believed to be reliable at the time obtained but neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers can guarantee its accuracy or completeness. This report is not and under no circumstances is to be construed as an offer to sell or the solicitation of an offer to buy any securities.