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Commentary

Q2 2025 Fund Commentary

Market Commentary

Financial market performance was driven by macroeconomic and geopolitical uncertainty during the second quarter of 2025. Uncertainty stemmed from the announcement of U.S. tariffs in early April, followed by a 90-day tariff pause. Other contributing factors included a first-quarter U.S. economic contraction, mixed jobs and inflation data, and a budget bill expected to increase the federal deficit. The U.S. government’s credit rating was also downgraded, and geopolitical conflicts in Ukraine and the Middle East continued.

Despite heightened uncertainty, which led to short-term volatility across U.S. equity markets, U.S. growth stocks rose to record highs by the end of June. This rebound was partly because of better-than-expected corporate earnings. Investor sentiment improved, as did investors’ appetite for riskier assets, including high-growth stocks.

Performance

The Fund’s relative exposure to NVIDIA Corp., Microsoft Corp. and Intuit Inc. was positive for performance. NVIDIA reported strong earnings because of demand for artificial intelligence (AI) infrastructure. Microsoft posted better-than-expected earnings and forecast updates because of outperformance in all three of its business segments, particularly its AI-related Azure business. Intuit reported better-than-expected third-quarter earnings.

Relative exposure to Thermo Fisher Scientific Inc., Arthur J. Gallagher & Co. and The Progressive Co. was negative for performance. Thermo Fisher was affected by mixed earnings results, with management citing Chinese tariffs and U.S. policy changes for its muted outlook.

After rising by more than 20% in the first quarter, shares of Arthur J. Gallagher fell as investors moved away from defensive stocks. (Defensive stocks are generally less sensitive to changes in the economy.) Like Arthur J. Gallagher, Progressive Co. reported positive results, but was affected by investors’ shift away from defensive stocks.

At the sector level, stock selection in industrials and information technology was positive for the Fund’s performance. Within information technology, strong earnings and improved investor sentiment about AI helped drive a sharp rebound across the Fund’s software and semiconductor holdings. Lack of exposure to consumer staples and energy also had a positive impact on performance.

Stock selection in health care and communication services was negative for performance. Underweight exposure to communication services and overweight exposure to financials was also negative.

Portfolio Activity

The sub-advisor added Shopify Inc., and Spotify Technology SA to the Fund. The sub-advisor believes Shopify’s infrastructure, omni-channel service and partner network should allow it to capitalize on the growth opportunity in enterprise and international markets. Spotify was added for its pricing power, steady user growth, conversion rate, content diversification strategy and margin expansion trajectory.

Alphabet Inc., MSCI Inc. and Thermo Fisher were sold in favour of the new holdings noted above. Agilent Technologies Inc. was sold in favour of The Charles Schwab Corp.

Outlook

As of quarter end, U.S. inflation continued to move towards the U.S. Federal Reserve Board’s (Fed) 2% target. However, uncertainty surrounding tariffs has kept the Fed from lowering interest rates, in the sub-advisor’s view. Still, markets expect the Fed to continue its rate-cutting cycle later in 2025, although the size and pace of rate cuts remain unclear. The sub-advisor believes this policy uncertainty is creating challenges for management teams and consumers, and by extension, investors.

Many companies have stated they are pausing hiring and investment decisions until there is greater clarity regarding monetary policy. Policy uncertainty has also weighed on consumer confidence, in the sub-advisor’s view, contributing to downward revisions in earnings estimates.

Disclaimer

The commentaries on the company specific information and purchases and sales were provided by the fund manager. Canada Life Investment Management Ltd. will not be liable for any loss, or damages whatsoever, whether directly or indirectly incurred, arising out of the use or misuse of errors or omissions in any information contained in this commentary. The data provided in this commentary is for information purposes only and, except where otherwise indicated, is current as of June 30, 2025.

The views expressed in this commentary are those of fund manager as at the date of publication and are subject to change without notice. This commentary is presented only as a general source of information and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide tax or legal advice. Prospective investors should review the offering documents relating to any investment carefully before making an investment decision and should ask their Advisor for advice based on their specific circumstances.

The content of this commentary (including facts, views, opinions, recommendations, descriptions of or references to, products or securities) is not to be used or construed as investment advice, as an offer to sell or the solicitation of an offer to buy, or an endorsement, recommendation or sponsorship of any entity or security cited. Although we endeavour to ensure its accuracy and completeness, we assume no responsibility for any reliance upon it.

This document may contain forward-looking information which reflect our or third-party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of June 30, 2025. There should be no expectation that such information will in all circumstances be updated, supplemented or revised whether as a result of new information, changing circumstances, future events or otherwise.

There can be no assurance that the Fund’s return or volatility targets will be met, or met over any particular time horizon. Targeted returns and volatility should be evaluated over the time period indicated and not over shorter periods. Targeted returns are not actual performance and should not be relied upon as an indication of actual or future performance.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.

Counsel Portfolios are managed by Canada Life Investment Management Ltd. Counsel Portfolios are distributed by Quadrus Investment Services Ltd., IPC Investment Corporation, and IPC Securities Corporation, and may also be available through other authorized dealers in Canada.