By Jamie Murray, CFA
The Industrial Economy Is Gaining Momentum
After several years of subdued activity, the U.S. industrial economy is showing increasingly convincing signs of recovery. The ISM Manufacturing Index rose to 55.6 in July, its highest level in more than four years, while new orders, production and employment all moved firmly into expansion territory. Orders for non-defence capital goods also increased 1.2% in June, suggesting businesses are beginning to invest again after an extended period of caution.
Corporate results reinforce this picture. Bellwethers like United Rentals reported a 13% increase in rental revenue and raised its full-year outlook as large projects, infrastructure investment and equipment utilization strengthened. Caterpillar delivered an even more striking result, with quarterly revenue rising 24% and its order backlog reaching $72 billion. Demand has been particularly strong across data centres, power generation and construction equipment, reflecting the enormous physical infrastructure required to support artificial intelligence, electrification and the rebuilding of domestic supply chains.
We believe this industrial resurgence is being driven by several forces coming together: years of underinvestment, reshoring, government-supported infrastructure and defence spending and an unprecedented buildout of power and computing capacity. Notably, this is occurring while housing and agricultural markets remain sluggish. For equities, the implication is that earnings growth may begin to broaden beyond the large technology companies that have dominated recent returns. Industrial businesses often possess considerable operating leverage, meaning even a modest improvement in volumes can produce meaningful earnings growth. We call out several beneficiaries in our portfolio commentary below.
Market Outlook
Equity markets took a break from the volatility in July, with major U.S. indices consolidating after their recent rally. The S&P 500 dipped a modest 0.1% for the month, largely reflecting a rotation out of some of the top-performing technology and AI names as investors began scrutinizing heavy capital expenditures and looking for clearer evidence of returns on that investment. Strong fundamentals, however, provided support. Second-quarter earnings got off to a solid start, with many companies reporting results ahead of analyst expectations.
Canadian stocks continued to show resilience. The S&P/TSX Composite gained roughly 1.1% in July, once again outperforming U.S. benchmarks. Stronger performance across energy and financials, along with steady support from materials, kept the broader Canadian index in positive territory.
Commodities bounced back after a quiet June, led by a strong rally in crude. West Texas Intermediate (WTI) closed the month around US$86 per barrel, with prices supported by persistent geopolitical uncertainty and continued friction between the U.S. and Iran.
MWG GLOBAL EQUITY GROWTH FUND
The MWG Global Equity Growth Fund Series O returned 3.0% in July, outperforming its benchmark return of -0.1% for the month. Year-to-date, the Fund has gained 6.5%, compared with 12.8% for the benchmark. Monthly performance was driven by strong gains in Accenture (+33%), Microsoft (+23%) and 3i Group (+18%). The primary detractors for the period were Hammond Power Solutions (-28%), Aritzia (-11%) and AstraZeneca (-10%).
Portfolio Manager’s Summary
The Global Equity Growth Fund made up ground on the benchmark thanks to a recovery in software-adjacent names such as Accenture and Microsoft, along with the sharp pullback in memory and semiconductor fabrication names that drove much of the underperformance in the first half of 2026.
We also saw several cyclical industrial stocks climb to new highs in July. Shares of Linamar reached an all-time high on strong performance in its industrial equipment business and a recovery in its auto parts operations. The company generates significant cash when new business slows and existing production lines mature and historically has been able to acquire underperforming assets at a discount to normalized values.
Other names, including Flowserve and Herc Holdings in rental equipment, are benefiting from major infrastructure projects. Flowserve has a strong position in the nuclear sector and bolstered its presence with the acquisition of Trillium. Herc has integrated the assets of H&E, cementing its position as the number three rental provider in North America. We expect its margins and return on invested capital to trend towards industry leaders United Rentals and Ashtead over time.
MWG INCOME GROWTH FUND
The MWG Income Growth Fund Series O returned 1.4% in July, outperforming its benchmark, which returned 0.8% for the month. Year-to-date, the Fund continues to lead, returning 23.3% compared with 12.6% for the benchmark. July performance was led by strong gains in BP (+21%), Canadian Natural Resources (+19%) and Whitecap Resources (+13%). The primary detractors for the month were Evertz Technologies (-15%), Capital Power (-11%) and Telus (-11%).
Portfolio Manager’s Summary
The industrial theme is ever present in the Income Growth Fund, with exposure to a broad array of specialty companies across energy infrastructure, chemicals, power and wood products.
We expect a catalyst-rich path for Canadian companies as the Government of Canada doubles down on national projects and eases the regulatory path to construction. While energy prices are difficult to forecast and could be plateauing, depending on what happens with the Strait of Hormuz, we believe countries around the world will increasingly look to Canada as a friendly and safe jurisdiction from which to procure base metals and energy.
Recently, we’ve also been adding to the food sector with purchases of Premium Brands and Canada Packers. Both businesses generate strong free cash flow and have relatively low capital expenditure requirements.
