Market Commentary
Geopolitical tensions in the Middle East drove a sharp increase in energy prices during March, reintroducing near-term inflation concerns. In response, short-term government bond yields in both Canada and the U.S. moved higher, with longer-dated yields also rising, albeit to a lesser degree.
Rising energy prices act as a drag on consumer spending, effectively reducing discretionary income and weighing on future demand. While the duration and outcome of the conflict remain uncertain, the economic impact is already beginning to take shape. Prolonged disruption is likely to further suppress demand and slow growth.
Market dynamics evolved as the month progressed. The initial rise in yields—particularly at the short end—appeared reactive to inflation concerns. However, toward month-end, attention shifted toward weakening growth expectations. Episodes of rising crude prices were increasingly met with stable or declining bond yields, reflecting a re-emergence of flight-to-quality demand.
The Fund remains positioned for a weakening Canadian economic backdrop. Exposure to long-dated Government of Canada bonds continues to be a key component, reflecting the view that long-term yields will decline as growth slows. Active trading within these positions has improved overall cost efficiency, while duration has been modestly reduced.
In foreign exchange, the Fund maintains a long U.S. dollar position relative to the Canadian dollar, consistent with expectations for relative economic underperformance in Canada. This exposure has also been actively managed, contributing to improved positioning.
The current environment reflects the early stages of a supply-driven inflation shock, extending beyond energy markets. At the same time, consumer demand in both Canada and the U.S. is showing signs of softening.
As growth slows—and with recession risks rising in Canada—downward pressure on long-term bond yields is expected to build. This, in turn, should lead to a flattening yield curve, consistent with prior economic downturns, supporting long-duration bond prices.
Fund Performance and Positioning
For the month of March, the Tactical Sovereign Bond Fund outperformed its benchmark, with a return of -0.6% versus a loss of -1.6% for the S&P Canada Sovereign Bond TR Index.
While capital preservation remains a key tenet of the Fund’s strategy, the Fund benefits from its ability to capitalize on evolving market dynamics within bond and currency markets. Federal Reserve’s independence, a position broadly supported by global central banks.
1Series F, total return CAD terms
2Duration is a measure of the sensitivity of the price of a bond to a change in interest rates. A fixed income security (or fund) with a higher (longer) duration would indicate a higher sensitivity to interest rates and thus, higher interest rate risk.
Standard performance as at March 31, 2026.
| Company | 1 Year | 3 Year | Since Reorganization3 (August 27, 2018) |
5 Year | Since Inception (July 25, 2016) |
|---|---|---|---|---|---|
| Caldwell Tactical Sovereign Bond Fund Series F | -1.8% | 2.7% | 1.3% | 2.1% | 0.7% |
| S&P Canadian Sovereign Bond Total Return Index | 0.1% | 2.5% | 1.3% | 0.5% | 0.8% |
3The Fund, following a security holder vote, changed its fundamental investment objective August 27, 2018 and also reclassified former Series I units to the current Series F. For more information refer to the Simplified Prospectus of the Fund.
The information contained herein provides general information about the Fund at a point in time. Investors are strongly encouraged to consult with a financial advisor and review the Simplified Prospectus and Fund Facts documents carefully prior to making investment decisions about the Fund. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Rates of returns, unless otherwise indicated, are the historical annual compounded returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any unitholder that would have reduced returns. Mutual funds are not guaranteed; their values change frequently and past performance may not be repeated.
Publication date: April 16, 2026.