Q2 2026 Review: Volatility to Victory

The Quarter in Brief

The second quarter of 2026 was shaped by a reversal in energy markets and a strong rebound in equities. Easing geopolitical tensions helped bring down oil prices and relieve some inflation pressure, setting the stage for a rally led by technology and semiconductor stocks that later broadened across the market. Meanwhile, the Federal Reserve held rates steady but struck a more cautious tone under new leadership — a theme we'll continue to watch closely.

Oil retreated sharply after peaking above $115 in early April, easing inflation as Middle East tensions de-escalated. Equities staged a strong recovery from late-March lows, marking some of their best quarterly performance in years. Semiconductor and tech names led the charge on AI-related infrastructure spending, a rally that broadened to mid- and small-caps by June. Through it all, the Fed kept rates unchanged but signaled a more watchful stance amid resurgent inflation pressures.

Markets and the Macro

Canadian equities posted an eighth straight quarterly gain, with the TSX 60 up 8.2% for the quarter and 31.5% over the past year. Global markets fared even better: the MSCI ACWI World Index gained 17.0% for the quarter (29.1% over one year), while the MSCI ACWI ex-Canada climbed 17.2% (29.0% over one year), reflecting broad strength outside our borders.

Fixed income held steady through the rate hold, with core Canadian bonds (XBB) up 2.0% for the quarter and 3.4% over the past year. The Bank of Canada's policy rate remained on hold at 2.25%, while inflation — as measured by CPI, came in at 2.8% year-over-year, driven largely by gas prices.

Your Pools, Your Performance

Across Kinsted's suite of pools, the story was one of broad-based gains, with two strategies standing out for meaningfully outpacing their benchmarks.

The Strategic Growth Pool led the way, returning 21.6% year-to-date against a benchmark of 15.5% — an outperformance of 6.0 percentage points — and 37.5% over one year versus a 28.8% benchmark. The Global Equity Pool was even stronger on a relative basis, up 27.0% year-to-date against a 15.8% benchmark (+11.2 points), and 48.7% over one year versus 29%.

The Canadian Equity Pool gained 9.7% year-to-date, trailing its TSX 60 benchmark of 11.5% by 1.8 points, with a one-year return of 20.4% against a 31.3% benchmark. On the income side, the Fixed Income Pool returned 1.4% year-to-date (benchmark 2.2%) and 2.8% over one year (benchmark 3.4%), while the Strategic Income Pool was close behind its benchmark at 2.1% year-to-date and 3.2% over one year. The Real Assets Pool rounded out the lineup at 1.7% year-to-date and 5.9% over one year, against a Canada CPI + 3% benchmark.

The Deeper Read

United States: The Rebound Nobody Saw Coming

Three months ago, investors were bracing for more trouble. Instead, the S&P 500 posted its best quarter since 2020, up nearly 15%, erasing the first-quarter decline entirely. What began as another narrow tech rally spread out — by June, small caps and the average stock were setting records too. The fuel was old-fashioned: profits. Analysts spent the spring raising forecasts, not trimming them, with earnings growth for the quarter coming in at 23.3%.

Canada: The Resilience Paradox

Canada spent the quarter debating whether it was in a recession while our stock market quietly recorded an eighth straight quarterly gain. The Bank of Canada stayed on hold at 2.25%, caught between gas-driven inflation and sluggish growth, GDP for the quarter came in at -0.1%.

The bigger story was trade. At the July 1 review, the United States declined to extend CUSMA, meaning the agreement now faces a review every year. The uncertainty isn't going away, and it's a theme we expect to shape the conversation heading into the back half of 2026.

The Outlook for 2026: The Question That Remains

The oil shock that rattled the first quarter faded quickly, as most geopolitical scares do. Now the market has to live up to its own expectations, with U.S. earnings forecast to grow 24% this year and valuations already full, companies simply need to deliver. The S&P 500 target sits at 7,850, with the forward price-to-earnings ratio around 20 times.

The busiest IPO market in decades is reopening the exit door for private companies, meaning distributions are starting to flow back to investors. Patience is starting to pay.

Where We See Opportunity

Our view on private markets rests on one edge and four strategies, unified by a simple idea: these structures use closed-end vehicles with no redemption pressure, allowing returns to be realized on the asset's timeline, not the market's.

Private Equity. The exit window is reopening. IPOs and M&A are accelerating into 2026, and a deep backlog of mature portfolio companies points to more realizations and distributions ahead.

Essential Infrastructure. Digital needs, the energy transition, and aging physical systems are converging. Power grids and data infrastructure are now as essential as traditional networks.

Asset-Backed Financing. Banks keep retreating from consumer and hard-asset lending. Contractual, collateral-backed cash flows offer attractive yield with diversification beyond corporate credit.

Secondaries. LP liquidity needs and slower distributions are keeping deal volume at records. Buying mature, funded portfolios at discounts to NAV shortens the J-curve and compounds returns from a lower basis.

Disclosures

Past performance does not guarantee future results. Opinions and estimates are written as of the date of this report and may change without notice. This commentary is provided for informational purposes only and is not considered investment advice. Readers should consult Kinsted Wealth, their investment advisor, tax advisor, financial planner, or lawyer before acting on this information. This communication is intended for Canadian residents only.

Kinsted Wealth is a privately owned and independent Portfolio Management firm, registered as a Portfolio Manager, Investment Fund Manager, and Exempt Market Dealer with the Alberta Securities Commission as its principal regulator.

Regards,
Kinsted Wealth