Balanced Fund Quarterly Report

March 31, 2026

Economic Commentary

Geopolitical risks became the dominant driver of global financial markets during the first quarter following the U.S. war on Iran. The major theme impacting the economy in 2025 was the potential impact that higher tariffs would have on global economic conditions. The landscape changed dramatically following the start of the war as oil prices surged while global trade was disrupted. There has been a shift away from economic fundamentals driving global markets to geopolitical events now shaping the economic cycle. Despite President Trump initially stating that the war would be over in a short period of time, the conflict continues and has led to increased uncertainly and volatility in financial markets. The closing of the Strait of Hormuz has led to supply chain
delays, contributing to increased shipping costs and slower global trade. Given that Trump has alienated many of his allies over the past year, there has not been coordinated support from many countries in the Iranian conflict.

Even though inflation has declined to start the year, expectations are for it to re-accelerate following the U.S. war on Iran. The surge in oil prices and the immediate impact on the price of gas will most likely lead to higher inflation levels going forward, putting an end to the disinflationary trend that we have seen. U.S. inflation declined from 2.7% in December to 2.4% in February, while Canadian inflation declined from 2.4% to 1.8% over the same period. These levels were surprisingly low given the negative impact that was expected following the implementation of the higher tariffs last year. Global economic growth prospects have been revised downward due to the impact that the war on Iran will have on the economy. The U.S. economy was exhibiting some momentum going into 2026, on the back of a resilient labour market, strong consumer spending and continued investment in AI infrastructure. These trends have cooled recently, putting downward pressure on economic growth. The Canadian economy has exhibited slower growth than the U.S. and is much more sensitive to higher interest rates than the U.S. economy, particularly in the housing market. The Canadian labour market has also slowed dramatically
over the past few months.