Investing Perspectives Q2 2026

Investors benefited from strong equity markets in the second quarter.  Following the March sell-off, investors quickly returned to riskier assets, supported by strong corporate earnings, enthusiasm surrounding artificial intelligence (AI) and confidence that the global economy could withstand higher energy prices and ongoing geopolitical uncertainty.

The strength of the major indexes, however, concealed considerable differences beneath the surface. Some companies associated with AI, semiconductors and other rapidly growing technologies recorded very large gains, while other established and highly profitable businesses struggled as investors questioned their future growth prospects.

One of the clearest examples of this divergence was the reception given to SpaceX following its initial public offering compared with the treatment of established technology companies such as Microsoft.  SpaceX completed the largest initial public offering in history in June, raising approximately US$75 billion at a valuation of close to US$1.8 trillion. Its shares rose sharply when trading began, briefly pushing the company’s value above US$2.5 trillion, before giving back a meaningful portion of those gains later in the quarter.

SpaceX is unprofitable, yet investors were willing to assign it an extraordinary valuation based largely on what it may become. Microsoft, by contrast, already generates substantial earnings but faced questions about whether its heavy spending on AI would produce acceptable returns.

Markets have always been attracted to companies that promise to transform an industry. That is understandable: many exceptional investments initially appeared expensive relative to their current earnings. However, identifying a great business is only part of the equation. Investors must also consider how much future success is already reflected in the price.

The comparison highlights an important distinction between a good company and a good investment. A strong business can still produce disappointing returns if expectations are too high, while an established company can become attractive when its share price declines more sharply than the quality of the underlying business.

That does not mean investors should avoid innovation or rapidly growing companies. It means valuation still matters.

Bridgeport Portfolio Update

Second quarter returns from Bridgeport’s publicly traded equity funds ranged from 6.9% to 10.7%, while the High Income Fund returned 3.3%*.

The Bridgeport US Equity Fund returned 8.9% in Q2 2026. Leading contributors included Applied Materials (+111%**), UnitedHealth Group (+55%) and Morgan Stanley (+28%). ConocoPhillips (-21%) and L3Harris Technologies (-15%) detracted from performance, as both were affected by what initially appeared to be an end to hostilities involving Iran.

Oil-related holdings accounted for several of the weakest performers across our funds during the quarter. Following the mid-June agreement between the US and Iran, investors anticipated a more durable easing of tensions, pushing oil prices and related equities lower into quarter-end.

That détente proved short-lived. After Iran struck two ships it said had violated the terms of the memorandum, the U.S. responded with several days of airstrikes. Because those developments occurred after June 30, the subsequent rebound in oil-related stocks is not reflected in the Fund’s second-quarter results.

The Bridgeport Canadian Equity Fund returned 6.9% in Q2 2026, led by strong performance from Bank of Montreal (+34%), Royal Bank (+31%) and Toromont Industries (+20%). Suncor (-17%) detracted from results as its share price fell as the price of oil declined.

Apotex, a Canadian generic pharmaceutical manufacturer, was a significant addition to the fund during the quarter.  We established an initial position through the company’s initial public offering and added to it after the shares began trading on the TSX. We believe Apotex has attractive long-term potential, particularly as Canada places greater emphasis on securing domestic production of critical goods, including pharmaceuticals, amid a less predictable geopolitical environment.

The Bridgeport Small & Mid Cap Equity Fund returned 8.3% in the second quarter. Leading contributors included Rogers Corporation (+53%), Savers Value Village (+36%) and MGM Resorts (+29%). Computer Modelling Group (-16%) was the largest detractor, as lower oil prices weighed on the shares.

A notable development in the fund during the quarter was the takeover bid for MGM Resorts. In June, the company received an offer from People Inc., led by Barry Diller, who is also MGM’s largest individual shareholder.  We believe the bid could attract interest from other acquirers and may represent the opening move in a broader auction for the company.

The Bridgeport Multi-Asset Fund returned 10.7% in Q2 2026. Major contributors included Applied Materials (+111%), Bank of Montreal (+34%) and TD Bank (+34%), while ConocoPhillips (-21%) detracted from performance.

The Bridgeport High Income Fund achieved a 3.3% return in Q2, driven by strong performance from dividend-paying equities and income generated by the fund’s corporate bond and loan holdings.

Bridgeport’s private asset portfolios generated modestly positive returns during the second quarter. The Bridgeport Private Equity Opportunities Fund returned 2.3% in Q2, supported by gains in secondary private equity strategies and higher valuations in funds focused on insurance and venture capital.

The Bridgeport Alternative Income Fund returned 1.6%, with the strongest contributions coming from fund finance, real estate lending and special-situations strategies.

The Bridgeport Private Real Estate & Infrastructure Fund gained 2.2% over the last three months, driven by its logistics, net-lease and infrastructure investments. During the quarter, the fund also made a new commitment to StepStone Infrastructure Secondaries, which acquires existing infrastructure fund interests, often at a discount, from investors seeking liquidity.

Final Thoughts

The second quarter was a strong one for public markets and Bridgeport’s equity portfolios, but it also reinforced the importance of looking beyond recent performance. Investor enthusiasm can quickly push expectations and valuations higher, while market leadership can change just as quickly. We continue to believe that disciplined security selection, careful attention to valuation and a well diversified asset mix provide a sound foundation for navigating a wide range of market environments.

Thank you, as always, for your continued trust and confidence. Please feel free toreach out with any questions.

Notes
*Bridgeport fund investment returns disclosed in this commentary are before fees.
**All disclosed share price returns represent Q2 2026 performance before dividends.  For holdings purchased during the quarter, returns are calculated from Bridgeport’s initial purchase date.