Investment Letter - Outlook and Portfolio Positioning

As we move into 2026, the economic backdrop is shifting beneath the surface in both the United States and Canada. While headline employment remains firm, the underlying trend in job creation is clearly weakening. In Canada, higher interest rates, elevated household debt, and slowing business investment are increasingly constraining hiring and wage growth. At the same time, rapid advances in artificial intelligence are accelerating productivity gains, allowing companies to expand output with fewer workers. Most remaining hiring momentum on both sides of the border is now concentrated in healthcare, while broader employment conditions continue to soften.

 

Both U.S. and Canadian consumers are becoming increasingly cautious, shifting spending from higher-end grocers toward value-oriented retailers. This trend is evident in the growing preference for discount chains such as Dollar General in the U.S. and Dollarama in Canada. Consumers are prioritizing essential goods and value over discretionary purchases, relying more on promotions, bulk buying, and private-label products. Meanwhile, many households are postponing major purchases amid ongoing economic uncertainty. This late-cycle behavior underscores the importance of a more defensive and selective investment approach.

Geopolitical risks remain elevated. Strategic competition in the Arctic, persistent tensions in the Middle East, and the expected return of Venezuelan oil supply over the next 18–24 months are likely to keep global markets volatile and continue to pressure the energy sector.

Looking ahead, we believe the core investment themes of 2026 will center on defense & aerospace, space & advanced technology — with the anticipated IPOs of SpaceX and Anthropic this summer acting as important valuation catalysts — alongside gold, precious metals, and resource equities, particularly silver. Within gold, our preferred holdings include Agnico Eagle, Newmont, Lundin Gold, and Alamos Gold, which we believe offer a compelling combination of balance-sheet strength, operational quality, and leverage to rising bullion prices. Select Canadian companies such as MDA Space, Telesat, and Kraken Robotics are also well positioned within these trends.

Conversely, energy is expected to underperform, and the U.S. dollar should remain under pressure at least through the U.S. midterm elections in November.

Your portfolio remains positioned to navigate this environment with a disciplined focus on risk management, capital preservation, and long-term opportunity.