Five Questions into 2026

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Our optimism for Canada is rooted in the idea

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that improving fundamentals have not

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yet been fully appreciated by the market.

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Recent economic data has improved markedly

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with strong GDP growth in the third quarter

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of last year and an unemployment rate that

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fell to a recent low.

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We believe the second quarter of 2025 will

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mark the trough for economic activity here

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in Canada.

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Furthermore, the recent federal budget shows

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a clear focus on boosting investment and

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activity which has been a key headwind

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for the economy for many years.

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While execution risks remain

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the combination of planned fiscal spending,

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a lessening of prior headwinds like mortgage

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renewals, and improving economic data

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gives us confidence in the Canadian outlook.

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While we're constructive on Canada we

recognize that we are not

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fully out of the woods yet.

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A key risk we are monitoring is the continued

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deleveraging of household balance sheets

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which could weigh on growth.

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There's also significant uncertainty

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surrounding the scheduled renegotiation of

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the CUSMA trade agreement which remains a

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critical variable for the economy.

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Finally, the success of the government's new

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pro-growth policies depends on

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effective execution which is not guaranteed

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and will take time.

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A failure to implement these plans

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effectively or a negative outcome

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from trade agreements could certainly

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challenge our more optimistic thesis.

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Our concerns in the U.S. are really centred

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on policy shifts that could threaten

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the U.S. dollar status as the global

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safe haven.

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For these risks to lessen we would need to

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see a clear reversal of these trends.

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This would involve a demonstrated commitment

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to the independence and credibility of

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key institutions like the Federal Reserve and

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less political interference generally.

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A shift away from the ongoing trade war

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and toward more creditor-friendly policies

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would also be helpful.

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Essentially, a change in policy direction

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that reinforces rather than undermines

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global investor confidence in U.S.

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assets would be required to reduce

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the risk premium we see building.

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While we acknowledge the uncertainty and

expensive valuations

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in the AI space our unique

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insight comes from our bottom-up research

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pillar. Our equity analysts across

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the world and the underlying portfolio

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managers we partner with continue to

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report that the market is underestimating

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the earnings power of these key AI companies

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over the visible horizon.

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A core principle of our philosophy

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is that stocks follow earnings so

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as long as these companies continue to

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out-earn market expectations we

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find it difficult to envision a sustained

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move lower.

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This insight informs our decision to

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remain moderately overweight equities

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while using diversification and other tools

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to control our overall risk.

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So as you mentioned, the paper does not

specifically mention

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Venezuela but I can speak to our broader

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framework for handling geopolitical

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events.

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Our approach is to focus on the impact these

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events have on asset prices and the

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economy rather than reacting to

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the political headlines themselves.

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One of the pillars of our process is to take

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advantage of market fears when sentiment

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becomes overly negative not

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to indulge it. The core of our strategy

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is to build diversified, resilient portfolios

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that can withstand these kinds of shocks

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over the medium term.

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Any event, whether in Venezuela or elsewhere,

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is analyzed through this disciplined,

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research-based framework to determine

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its actual impact on our investments.