At the beginning of 2026, Mackenzie argued that investors would be rewarded for looking beyond the narrow leadership that had dominated markets in recent years. Six months later, that thesis has largely played out.
Global stock markets posted strong gains in the first half of the year. But the bigger story wasn’t how much markets went up — it was the breadth. Canadian equities, international developed markets, emerging markets and U.S. small-cap companies all outperformed many of the most familiar heavyweight names. For investors willing to diversify beyond concentrated exposures, the rewards were significant.
At the same time, many of the structural themes we highlighted continued to gain momentum. Capital investment tied to AI accelerated, infrastructure spending expanded globally and demand for industrial commodities remained robust. Gold climbed to new highs before retreating, while copper and other industrial materials benefited from a powerful capital expenditure cycle.
Not every development unfolded according to script. The geopolitical shock that emerged from the conflict involving Iran and the closure of the Strait of Hormuz quickly became the defining macro event of the first half. Oil replaced gold as the market’s commodity of choice, triggering renewed inflation concerns and forcing investors to reassess expectations for central bank policy. Markets were reminded that geopolitical risks can still matter deeply when they directly affect global supply chains and energy markets.
Yet perhaps the biggest lesson from the first half is that the global economy can withstand considerable uncertainty. Corporate profitability, particularly in the United States, surprised even optimistic forecasts. AI-related spending continued to expand far beyond data centres, reaching into industrials, utilities, power infrastructure and grid modernization projects.
Businesses that once discussed AI as a future opportunity are now deploying capital against tangible initiatives. The result has been continued earnings growth and a broader economic impact than many anticipated.
Fundamentals intact
Looking ahead, we still think conditions are generally positive for stocks and other growth investments, although there may be more ups and downs along the way. Strong company earnings have so far helped support stock markets, even with higher inflation, ongoing global uncertainty and changing expectations for interest rates.
Fiscal policy remains a meaningful support. In the United States, the effects of the One Big Beautiful Bill Act continue to work their way through the economy, supporting both consumer spending and business investment. Canada’s infrastructure-focused fiscal initiatives should provide additional support domestically, even if their full benefits take longer to materialize. Across Europe and parts of Asia, deficit-financed spending programs continue to support growth and corporate earnings. The global capital spending cycle also remains intact.
Importantly, this is no longer just a technology story. Increasing defence commitments, energy security initiatives, electricity demand and AI-related infrastructure requirements are creating opportunities across multiple sectors. What began as a narrow investment theme a few years ago has matured into a broader economic cycle that touches industrial companies, utilities, resource producers and real assets.
Fixed-income challenge
However, one important pillar supporting markets appears less secure than it did six months ago — inflation.
In the United States, core inflation continues to hover near levels that leave policymakers uncomfortable. As a result, Federal Reserve officials are increasingly focused on maintaining credibility in the fight against inflation rather than supporting growth. Financial markets have shifted from expecting rate cuts to debating the possibility of additional tightening.
For bond investors, this creates an important challenge. If inflation proves difficult to tame, long-term yields may need to rise further to compensate investors for inflation risk. That environment argues for maintaining discipline within fixed-income portfolios and focusing on high-quality corporate credit rather than stretching aggressively for yield.
Fortunately, corporate fundamentals remain healthy. Balance sheets are generally stable, profit growth is supportive and default risks remain contained. While credit spreads have tightened, we continue to believe investment-grade corporate bonds offer a more attractive risk-reward profile than lower-quality segments of the market.
For equity investors, the message is similar to the one we delivered at the start of the year: broaden, don’t concentrate. The temptation to crowd into a small group of familiar market leaders remains strong. But 2026 has already demonstrated that opportunities exist well beyond the largest U.S. technology companies.
Canadian equities, international markets and small- and mid-cap companies continue to offer attractive valuations and compelling growth prospects relative to many crowded areas of the market.
Commodities also deserve continued consideration as portfolio diversifiers. The structural drivers supporting energy security, infrastructure investment and AI-related demand have not disappeared. If anything, they have become more deeply embedded in the global economy.
Stay the course
The second half of 2026 may bring additional volatility. The recent collapse of the ceasefire between the U.S. and Iran and the associated escalation of the conflict, shifting trade negotiations, renewed tariff announcements and the approaching U.S. midterm elections all have the potential to create periods of elevated market uncertainty. But corrections are a normal feature of investing, not evidence that something is broken. They often create opportunities to take advantage of market dislocations.
The environment will continue to evolve, but the case for broad diversification has only grown stronger. For advisors and investors alike, staying the course may prove to be the most important investment decision of all.
