Markets Navigate Geopolitics and Sector Rotation
Geopolitical tensions returned to the forefront of global markets in February as conflict involving the United States, Israel and Iran introduced renewed volatility across energy markets and broader risk assets.
Oil and gasoline prices moved higher as markets reacted to potential disruptions to Persian Gulf supply. While the situation remains fluid, recent intelligence suggests Iran’s military capabilities may be deteriorating. Should this lead to a normalization of regional energy exports in the coming weeks, some of the recent pressure on oil markets could ease and help stabilize investor sentiment.
Looking further ahead, the macroeconomic backdrop continues to reflect a combination of geopolitical realignment and fiscal expansion. Governments around the world are increasing defense spending and infrastructure investment, trends that are likely to keep inflation modestly elevated over the medium term.
While inflation has moderated from peak levels, tariffs, commodity costs and ongoing supply chain adjustments continue to place upward pressure on prices. At the same time, uncertainty surrounding U.S. trade policy has weighed on corporate capital spending decisions and may partially explain the softer pace of job growth observed in recent economic data.
Despite these headwinds, several structural growth drivers remain firmly in place. Large-scale infrastructure investment tied to artificial intelligence (including data centers, power generation and semiconductor manufacturing) is expected to support economic activity for years to come.
Against this backdrop, we continue to see compelling long-term opportunities across sectors linked to AI infrastructure, natural gas, defense, healthcare innovation and commodities, while maintaining a disciplined approach to managing macroeconomic risk within the portfolios.
Market Update
North American equity markets diverged meaningfully in February.
The S&P/TSX Composite Index advanced approximately 7.5%, benefiting from strong performance in cyclical sectors such as energy and materials. Canada’s resource-heavy market structure positioned it well as investors rotated toward commodity-linked businesses.
In contrast, the S&P 500 declined roughly 0.9%, as investors adopted a more cautious stance toward several large-cap technology and software companies following an extended period of strong performance.
Commodity markets remained a focal point throughout the month. Gold finished February near $5,231 per ounce, supported by continued safe-haven demand amid geopolitical uncertainty. WTI crude oil rose roughly 4% to close the month near $67 per barrel, reflecting concerns about potential supply disruptions in the Middle East. Prices have moved higher in the early part of March as tensions in the region escalated.
The fixed income environment was somewhat more constructive. The U.S. 10-year Treasury yield declined to approximately 3.97% by month end, reflecting moderating inflation expectations and increased demand for defensive assets.
MWG Global Equity Growth Fund Performance
The MWG Global Equity Growth Fund Series O declined 1.3% in February, compared with a 0.6% decline in the benchmark.
Among the portfolio’s strongest contributors during the month were Moderna (+22%), Major Drilling (+21%) and Alamos Gold (+17%), each benefiting from renewed investor interest in healthcare innovation and hard-asset exposure. The largest detractors were Vital Farms (-25%), Accenture (-20%) and Nu Holdings (-15%), reflecting the broader valuation compression seen across several growth-oriented and technology-enabled companies.
Table 1. MWG Global Equity Growth Fund (February 2026)
Portfolio Managers’ Summary
Growth equities continued to experience a period of valuation compression in February. Despite many companies reporting solid operating results, investor sentiment shifted toward more cyclical sectors, leading to lower valuation multiples across several growth-oriented companies.
Several of the weaker performers in the portfolio are technology-enabled industry leaders. Their share prices were influenced by what we previously described as the AI “fear trade,” where concerns around disruption and changing competitive dynamics temporarily pressured valuations.
Conversely, companies tied to hard assets and global infrastructure, particularly in mining and transportation, were among the strongest performers during the month.
We made one portfolio adjustment during February, selling Hudbay Minerals and initiating a position in Alamos Gold. While Hudbay has some exposure to gold production as a secondary focus, Alamos provides direct leverage to the gold price and operates assets located in geographically stable jurisdictions.
MWG Income Growth Fund Performance
The MWG Income Growth Fund Series O rose 7.7% in February, outperforming the benchmark return of 6.7%.
Performance during the month was led by PHX Energy Services (+43%), Opera (+30%) and Canadian Natural Resources (+17%), which benefited from strong energy markets and improving fundamentals across several industrial businesses. The largest detractors were GO Residential REIT (-5%), Telus (-4%) and Chemtrade Logistics (-1%), although these positions remain aligned with the Fund’s long-term income and infrastructure themes.
Table 2. MWG Income Growth Fund (February 2026)
Portfolio Managers’ Summary
The Income Growth Fund continued its strong run in February and has now generated a 38% return over the past twelve months.
Performance has been driven largely by the portfolio’s exposure to energy producers, power infrastructure companies and select industrial businesses that stand to benefit from major global infrastructure spending.
During the month we added three new positions to the portfolio.
First, we initiated investments in GO Residential REIT and Primaris REIT, as we continue to find attractive opportunities within the real estate investment trust sector.
GO Residential is a recent IPO that owns high-quality apartment properties in New York City. Since its listing in July, the units have declined approximately 35% and now trade at a meaningful discount to estimated net asset value. Private market transactions continue to support the underlying property valuations and, unlike Toronto, the New York rental market continues to experience rising rents and constrained new supply.
The recent election of Zohran Mamdani has contributed to a reversal in investor sentiment toward the sector. However, our view is that potential regulatory changes will have limited impact on GO’s assets over the medium term and may further restrict new development, ultimately supporting the value of existing properties.
We also initiated a position in Primaris REIT, which owns regional shopping centres in secondary Canadian markets. In many of the communities where Primaris operates, these malls function as the primary destination for fashion, services and social gathering. While these properties carry greater exposure to discretionary retail than grocery-anchored centres, the company maintains conservative leverage and a modest payout ratio, providing flexibility for reinvestment.
Finally, we added Telus Corporation, where the current dividend yield of approximately 9% appears attractive relative to the company’s long-term fundamentals. The Canadian telecom sector is entering a more rational promotional environment, and we expect Telus to gradually reduce leverage through asset sales and lower capital expenditures.
The company’s decision to appoint Victor Dodig, former CEO of CIBC, as Chief Executive Officer beginning July 1, 2026, is a development we view positively given his strong track record of leadership.
While we did not exit any positions during the month, we reduced our weighting in Exchange Income Fund from 6% to 2% following a significant share price increase over the past year. The dividend yield has now fallen below our 3% minimum threshold for inclusion in the Income Growth strategy.
