Third Quarter 2026 North American Equity Strategy

Summary: 

The stock market had a modest quarter, with the S&P 500 posting small gains. More importantly, the Federal Reserve raised interest rates, signaling concerns about inflation that’s still stubbornly above where they want it to be. While this rate hike might make borrowing more expensive and create some market jitters, the broader economic picture remains surprisingly solid.

The real story this quarter is about company earnings. Profits are growing much faster than stock prices have been rising, which means stocks are becoming cheaper relative to what companies are actually earning. This is a healthier situation than earlier in the year when stocks felt expensive.

Technology and communications companies make up nearly half the stock market, but they’re no longer trading at the crazy valuations we saw during the dot-com bubble. They’re now priced fairly compared to their earnings potential. Semiconductors—the chips that power artificial intelligence—look particularly attractive. These companies are benefiting from massive demand for AI infrastructure, and their stock prices have fallen significantly even as their profit prospects have improved.

Canada’s economy is performing surprisingly well. While higher interest rates and trade tensions would normally be headwinds, Canada is actually thriving because it exports lots of oil, metals, and other commodities that have become more valuable. The portfolio is strategically positioned in energy, materials, and financial sectors that benefit most from these conditions.

Despite the Fed’s cautious stance on rates, strong corporate earnings and a healthy economy provide a foundation for continued market gains. The investment strategy remains focused on quality companies positioned to benefit from technology spending and secular growth trends, while maintaining some cash reserves to take advantage of any market weakness that might emerge.

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