Balanced Fund Quarterly Report

June 30, 2026

Economic Commentary

The U.S. and Iran reached a fragile truce with the signing of a 14-point memorandum of understanding bringing a halt to hostilities. The agreement opened a 60-day window for further negotiation on multiple issues including freedom of navigation through the Strait of Hormuz, Iran’s nuclear program and the lifting of sanctions. The agreement was universally welcomed by financial markets as the opening of the Strait allows for the flow of shipping traffic, particularly oil shipments, to resume. How quickly transit through the strait can be returned to pre-war levels will be closely watched as tensions remain high and navigation through the Strait has become increasingly difficult. Oil prices, which had spiked at the onset of hostilities, fell on news of the agreement, finishing the second quarter 31% lower with WTI at $69.50. Elevated energy prices had been the most impactful way the conflict was being felt amongst businesses and consumers, and the agreement has the potential to remove a significant headwind to global growth as we move into the second half of 2026.

The surge in energy prices brought about a re-acceleration in headline inflation numbers around the world as the war’s impact was immediately felt at the gas pump. U.S. inflation rose to 4.2% in April from 2.4% in February while Canadian inflation followed suit, rising to 3.2% from 1.8% over the same period. The European Central Bank was the first to act with a 25 bp hike in June to combat further price escalation in the region. Both the Bank of Canada and the U.S. Fed chose to keep rates unchanged; however, each highlighted the elevated levels of headline inflation and their commitment to delivering price stability. So far in Canada, elevated energy prices have not leaked into the broader economy as core inflation remained near the 2% target level. Stagflation fears remain, especially in Canada, given the weaker economic backdrop as U.S. trade uncertainty persists. The fall in energy prices towards the end of the quarter will be a welcome relief as headline inflation is expected to recede over the coming months. This will give the central banks more time to evaluate the incoming economic data before having to act.