Balanced Fund Quarterly Report

September 30, 2026

Economic Commentary

Geopolitical risks flared up yet again as the cease fire between the U.S. and Iran failed to hold. Both sides have blamed the other for breaching the terms of the temporary agreement that had brought a brief pause to hostilities. As further military strikes by the U.S. failed to result in an easing of Iranian demands, President Trump has changed course to rely more on economic sanctions as opposed to military strikes in an attempt to isolate the Iranian regime. With both sides now dug in on their demands, investors have resigned themselves to the fact that a resolution to the conflict is not forthcoming. The political implications of another prolonged war in the Middle East could soon be felt as the U.S. looks forward to their mid-term elections in November. Early polling suggests Republicans are facing significant headwinds as President Trump’s popularity sinks with voters facing higher costs at home in the form of higher gas prices, food prices and mortgage rates. The results of the mid-terms could have a significant impact depending on which party emerges with control over the House and Senate.

While the conflict in the Middle East had the effect of initially driving benchmark oil prices like WTI and Brent higher, further strain on global energy markets has emerged from the global shortage of refining capabilities. Damaged infrastructure, shipping instability and fuel export bans have all contributed to reducing the global supply of refined products like diesel, gasoline and jet fuels. Due to these conditions even when oil prices have faded off their recent peaks, the reprieve has not been felt as much at the pumps for consumers or businesses. So far, the data points to inflation being contained to energy prices for the time being. In Canada headline inflation rose slightly to 3% August while core measures remained grounded at approximately 2%. In the U.S. the headline rate was slightly higher at 3.4% for August while core was more in line at 2.4%. However, the longer the current energy price environment persists, the harder it will be to keep elevated prices from spilling over into the rest of the economy.