Economic growth was average in advanced and emerging countries as the year 2026 began; a fair state of affairs. In the United States, the economy was supported by spending by higher-income households and infrastructure construction, buoyed by artificial intelligence-related investments. The overall narrative was managed global inflation and easing monetary cycles.
The war in Iran, the defining event of the first quarter, upended this scenario in late February, adding a geopolitical dose of uncertainty to the outlook. Concerns about tariffs rapidly receded in the background.
So far, the main impacts of the war have been increases in the price of oil and other commodities, a rise in interest rates, and a strong American dollar due to its worldwide reserve currency status. Oil usage per dollar of GDP is at a record low but economic activity is nonetheless bound to soften and inflation to increase with a lag.
Canada, a net energy exporter, will see a boost to national income but household spending will be hurt, and so will it be in the United States. Europe and Asia are net energy importers and face the prospects of higher economic input costs and weaker domestic spending.
The Canadian yield curve experienced a small parallel upward shift across all maturities this quarter, which was more accentuated below six years. This was caused by the inflationary concerns. Consequently, the FTSE Canada Universe Bond Index (0.2%) and the S&P/TSX Preferred Share Index (0.4%) delivered modest returns.
The benchmark’s equity indices had lackluster returns as well: S&P/TSX Composite Index (3.9%), S&P 500 Index (-2.7%), and MSCI EAFE Index (0.5%). The commodity-driven Energy and Materials sectors and the safe haven Utilities led.
The growth-oriented Information Technology sector pulled back hard, hurt by the rise in interest rates.
The Triasima Balanced Income Fund had a 4.4% return this quarter, versus 1.2% for its benchmark.
The outperformance came from security selection within Canadian and international equities. Key contributors included oil Canadian producers Tamarack Valley and Whitecap Resources alongside defensive positions like German utility EOAN and Latin American telecom Millicom.
Amid elevated equity market gyrations and a bond market torn by rising inflation expectations, the fund structure moved toward a more defensive allocation, with a 3% augmentation of the cash reserve and preferred shares weighting. This was funded by reductions in American and International equities.
Within the equity sleeve, with energy prices increasing, exposure to the Energy sector grew with the addition of Noble Corp and Whitecap Resources. Conversely, the Consumer Discretionary and Information Technology sectors, whose valuations are hurt by higher interest rates, were pared back a total of 7%.
On the bonds side, portfolio duration was extended from 7.0 to 7.4 years, above that of the benchmark (6.8 years). The Fund’s current income yield stands at 3.0%.
On the quantitative side, the equities held by the Fund have better risk metrics and higher revenue growth than the equity benchmark.
Interest rates moved up somewhat this quarter, but the general trend is still sideways. On the equity side, the previous uptrends by the benchmark’s three equity indices have evaporated. A sideways consolidation phase may now be at hand.
Despite the large weight of the Energy sector in the Canadian equity index, the fundamental background for the Fund’s equity benchmark deteriorated due to the Iran war’s repercussions. Fortunately, corporate profits keep on growing.
The posted rate of return is a historical total rate of return compounded annually, except for periods of less than one year, which are not annualized. The rate of return shown takes into account fluctuations in unitholder value and the reinvestment of distributions. The posted rate of return does not take into account investment management fees and income taxes payable by the unitholder, which would have the effect of reducing the return. The Funds are not guaranteed, their value fluctuates, and past performance is not indicative of future results.
The benchmark for the Triasima Balanced Income Fund is composed of the following indexes: 5% FTSE Canada 91 Day T-Bill, 30% FTSE Canada Universe Bond, 5% S&P/TSX Preferred, 35% S&P/TSX Composite, 15% S&P 500 Net (CAD) AND 10% MSCI EAFE Net (CAD).
Data on the FTSE Canada 91 Day T-Bill, FTSE Canada Short Term Bond and FTSE Canada Universal Bond reference indices are provided by FTSE Global Debt Capital Markets Inc. (“FTSE”). Data on the S&P/TSX Income Trust, S&P/TSX Preferred Share, S&P/TSX SmallCap, and S&P/TSX Composite reference indices are provided by TSX Inc. (“TSX”). Data on the S&P 500® Index are provided by Standard & Poor’s Financial Services LLC (“S&P”). Data on the MSCI EAFE, All Country World, and World reference indices are provided by Morgan Stanley Capital International Inc. (“MSCI”). Lastly, the classification of securities according to the Global Industry Classification Standards (“GICS”) is provided jointly by MSCI and S&P. (FTSE, TSX, S&P, and MSCI are hereafter collectively referred to as “indices and data providers”.)
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