Show Notes
Canadian equities gained in the second quarter of 2026 even as the economy tripped the technical definition of a recession and an oil shock sent crude toward $120 before it fell back. Institutional portfolio manager Kevin Minas and investment counsellor Stu Morrow review the quarter, from the gap between the Canadian market and the Canadian economy to the case for holding commodity exposure as geopolitical risk becomes a recurring feature rather than a one-off. They also discuss what a narrow, AI-led rally means for a diversified portfolio, record hyperscaler bond issuance in Canada, and how the Bank of Canada and the Fed held rates through a volatile stretch. The conversation closes on the quarter's asset allocation: trimming equities back toward a neutral mix.
Key Takeaways Canada met the technical definition of a recession, but the picture underneath was nuanced. GDP rebounded about 0.5% in April with most industries expanding, and per-capita output grew, closer to a stall-speed economy than a true contraction. The market and the economy can tell different stories. Financials and energy dominate the TSX while real estate and healthcare drive more of the real economy, which helps explain a roughly 7% TSX return alongside soft growth. Geopolitical risk increasingly looks like a recurring condition rather than a rare tail event. With oil spiking near $120 before falling back toward $70, the episode makes the case that commodity exposure can play a portfolio-construction role, chosen selectively where valuation and business quality support it, rather than serving as a call on prices. The Fed stood pat under new chair Kevin Warsh, and the Bank of Canada held across its April and June meetings after cutting substantially. In Canadian bonds, the team added duration as yields rose on inflation fears and removed it as they fell. On AI, the aim is not to guess whether the buildout keeps running, but to choose which risk to live with: too much concentration in the theme on one side, or falling behind by stepping away from it on the other. The team keeps the portfolio from leaning too far in either direction by weighing the companies spending on the buildout against the hyperscalers earning from it, since one company's capital spending is another's revenue. With memory stocks, the risk lies less in the multiple paid than in the cyclicality of the earnings. Credit was constructive, with record hyperscaler issuance in Canada including a $14 billion Amazon deal that Mawer participated in. With spreads tight, positioning stayed higher-quality and shorter-dated, and the balanced strategy trimmed equities back toward a neutral asset mix. Companies Mentioned: Amazon, Alphabet (Google), Meta, Microsoft, Oracle
Host: Kevin Minas, CFA, CAIA, Mawer Institutional Portfolio Manager Guest: Stu Morrow, CFA, Mawer Investment Counsellor
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Founded in 1974, Mawer Investment Management Ltd. (pronounced "more") is a privately owned independent investment firm managing assets for institutional and individual investors. Mawer employs over 250 people in Canada, U.S., and Singapore.
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