The third quarter reinforced a theme that has shaped markets throughout much of 2026. The growing contrast between strong corporate fundamentals and a challenging macroeconomic backdrop. Economic growth did remain resilient. Corporate earnings generally exceeded expectations, and businesses continued investing heavily in artificial intelligence,
digital infrastructure and semiconductors. Increasingly, economic growth is being supported by business investment rather than consumer spending, providing an important source of strength for both the economy and for corporate profits.
At the same time, investors continued to contend with persistent inflation, elevated interest rates, geopolitical uncertainty and rising energy prices. In September, the US fed raised interest rates by 25 basis points, reinforcing the view that inflation remains a priority and that policy rates may stay higher for longer than markets anticipated earlier this year. Bond markets responded with a sharp increase in yields, pushing borrowing costs higher for households and for businesses, creating headwinds for interest rate sensitive sectors.
Now, while headline equity indices remained relatively resilient, market leadership became increasingly concentrated among a smaller group of companies, benefiting from the ongoing artificial intelligence investment cycle. Beneath the surface, many sectors and smaller companies faced a more difficult environment as investors became increasingly selective. September itself served as a reminder that despite these strong earnings and healthy corporate fundamentals, that broader picture of the macro backdrop remains an important influence on market sentiment.
Throughout the year, markets have alternated between focusing on company level results and reacting to concerns surrounding all of these macro concerns I've been talking about. That tension between these two narratives largely defined this last third quarter. Despite these crosscurrents, the Matco investment platform continued to deliver strong relative results. Our global equity fund returned 12.8% year to date, ranking in 38th percentile.
The Opportunities Fund gained 12%, ranking in 44th percentile. The Matco Canadian Equity Income Fund returned 11.9%, ranking in 35th, and the Matco Balanced Fund returns 7.1%, placing it in 34th percentile in its category. Particularly notable was a diversified income fund, which limited losses to just 3% during a difficult period for fixed income markets. It did rank in 15th percentile in its peer group
however. These results reflect the benefits of diversification, discipline, portfolio construction, and a long term investment approach.
Looking ahead, we remain constructive on the investment environment. Although periods of volatility should be expected, economic growth remains positive. Corporate earnings continue to expand, and investment in artificial intelligence and related infrastructure is providing significant support to economic activity. Over time, we believe these investments have the potential to drive meaningful productivity gains and create attractive opportunities for long term investors.
The primary challenge remains inflation. While it has declined significantly from its peak, recent data suggests progress has slowed, which may keep central banks cautious. Interest rates are therefore likely to remain elevated relative to levels investors have become accustomed to
over the previous decade. While this is likely to create periodic volatility and valuation pressure, it also provides more attractive income opportunities within fixed income portfolios.
Now, looking ahead, investors will also begin turning their attention to the US midterm elections here in November. While election periods often generate headline risk and market uncertainty, history suggests that political outcomes tend to have less influence on long term investment returns than economic fundamentals, corporate earnings and monetary policy. That said, the election could shape the outlook for taxation, fiscal spending, regulation and trade policy, which may contribute to elevated market volatility as investors assess those implications of the result of the election.
Encouragingly, the strong relative performance across the Matco platform during 2026 is a reminder that successful investing is not dependent on accurately predicting every economic headline. Rather, it is the result of discipline, portfolio construction, thoughtful capital allocation, and keeping a long term perspective through all market environments. As always, our focus remains on high quality businesses remaining disciplined, being thoughtful while short term market movements will inevitably be influenced by economic data, central bank decisions, and political developments, we remain focused on long term opportunities that are available to patient and diversified investors.
