Conflict favours commodities and Canada

Jon Knowles [00:00:02] Hello, my name's Jon Knowles. I'm an institutional portfolio manager at Fidelity. We just published our latest thought leadership paper for the second quarter of 2026. While the headlines have been relentless and at times hard to keep up with, we believe there are two key themes emerging that our investors stand to benefit from. Firstly, Canada stands out amongst its peers. Elevated levels of geopolitical uncertainty has kicked off what we see as a scramble for resources. This makes reliable commodity producers like Canada an increasingly important part of the global investment landscape. With this in mind, we have increased our exposure to Canadian investments and the Canadian dollar. We believe the currency is set to strengthen alongside commodity prices as policy becomes more supportive of investment in the resource sector. This is a correlation that stood for many years, but recently has deteriorated given the market's of confidence. That higher commodity prices would stimulate investments. We believe this link may be back. Broadly, we see conditions supporting Canadian assets to be among the most favourable in recent memory, but also against the broader opportunity set of markets we can own. Secondly, diversifying exposures have increased importance. As we've proposed recently, bonds are less reliable hedge than they used to be. In this environment, diversification requires more creativity. The catalyst for this change is a clear shift from growth shocks, which had dominated the first two decades of the century, towards inflationary shocks, which cause bonds and stocks to move in the same direction. In this enviroment, it is helpful to own investments that are part of the problem. For our portfolio, that means owning commodities, which has been a significant driver of risk adjusted returns over the last few years. In a world where diversification is more important, we can't just rely on commodities. As part of our broader strategy to diversify our portfolios, we also utilise alternatives, inflation-protected bonds, and currency positioning. While this specific conflict was unknowable, the broader contours of rising geopolitical tensions has been predictable, and we've been preparing for the investment environment it was likely to present. As always, our approach is to remain active, flexible and to adjust our positioning to manage risk and drive return in response to the environment we face. Please head to fidelity.ca where you can find the paper published on the homepage.