Q1 2026 Strategy & Market Reviews

Each quarter, our Investment Management teams publish their key observations and portfolio updates across Global Equity and Fixed Income markets. This is a summary of our views for the First Quarter of 2026. You can download the full reports via the links shown below.

Key Observations

During the first quarter, the S&P 500 posted a total return of -4.33% in U.S. dollar terms, which improved to -2.84% in Canadian dollar terms, while the S&P/TSX Composite Index delivered a positive total return of +3.94%, driven mainly by energy stocks. Current data indicate that economic growth is moderating but remains positive, the consumer continues to spend at a healthy pace, and credit markets are not signaling systemic stress.

The tone in the market changed significantly on February 28th when the United States and Israel launched airstrikes across Iran. While the conflict created heightened uncertainty, our base case is that the impact on the markets from the war will be short lived, supported by historical evidence showing the S&P 500’s typical trajectory around geopolitical events dating back to World War II. Even if the conflict ends quickly, a persistent war premium in the oil futures strip would likely benefit energy producers.

At its March meeting, the Federal Open Market Committee maintained the target range for the federal funds rate at 3.50%–3.75% and appears in no rush to lower interest rates. Meanwhile, the earnings backdrop remains strong and supportive of equities, with five consecutive quarters of double-digit earnings growth for the S&P 500 and strong forward earnings expectations for 2026 and 2027.

In Europe, Eurozone business activity accelerated faster than forecast in February as manufacturing swung back to growth for the first time since October. In Japan, the Bank of Japan’s quarterly Tankan survey reached its highest level since Q4 2021, while returns were also positive reflecting the enthusiasm of ongoing changes to corporate governance and a pro-growth mandate. In addition to positive economic indicators, corporate earnings were revised higher across most geographic regions in the early part of 2026, with Europe being the notable exception.

In summary, the combination of resilient economic growth, continued earnings momentum, and the prospect of a relatively swift resolution to the conflict has kept us constructive on equities going forward, despite elevated geopolitical uncertainty.

North American Equity Update

Peter Jackson, HBSc, MBA, CFA

Chief Investment Officer

Portfolio Manager, North American Equities

Our overall equity exposure decreased modestly from 99% to 95%, while cash increased from 1% to 5% during the quarter. Within equities, U.S. exposure edged down slightly from 53% to 52%, while Canadian exposure saw a more notable reduction from 46% to 43%. Many client portfolios are invested through our North American plus International Equity strategy, which remains at 80% US/Canada and 20% International equities currently; as a result, the effective weights of U.S. and Canadian equities within total equity allocations are proportionally lower due to exposure to international markets.

In our North American strategy, we established the following positions:

TJX Companies is a liquidation retailer with 5,200 stores today and plans to grow to 7,000 stores as it enters new markets in Europe and Latin America. We expect TJX to be able to consistently grow earnings at 10%+ for years to come through a combination of same-store-sales growth, store unit growth, and margin expansion.

Union Pacific Railroad is the second largest Class 1 railroad with industry-leading profitability. It is pursuing a merger with Norfolk Southern to establish the first US transcontinental railroad by the first half of 2027 which, if approved, will enhance its competitive advantages.

Canadian Natural Resources Limited is the largest crude oil producer and the second largest natural gas producer in Canada. Its vast reserves allow the company to generate substantial and sustainable free cash flow. CNQ has increased its dividend 25 consecutive years with a 21% compound annual growth rate.

Rockpoint Gas Storage has natural gas storage facilities in western North America (California and Alberta). Free cashflow conversion of EBITDA is high as they have little capital spending beyond modest maintenance. They have a small trading operation, which provides extraordinary additional profits in times of energy volatility like right now.

MDA Space is a 45-year-old Canadian world leader in space equipment manufacturing (they make the Canadarm robotic arm on the International Space Station). Industry demand has taken off in recent years with launch costs falling dramatically. The SpaceX IPO will only bring increased attention to the space economy and the more modestly priced MDA stock.

Gildan Activewear has historically dominated the activewear business. They recently acquired competitor Hanesbrands, which dominates an adjacent market of branded underwear. We see the integration of the two companies as a match made in heaven, allowing Gildan a low-cost entry into the branded retailer channel.

A detailed review of each holding can be found in the full report per the link above.

 

Global Equity Update

Phil D’Iorio, MBA, CFA
Portfolio Manager, Global Equities

Global equity markets got off to a good start in 2026. However, several global indices finished the first quarter with negative returns. Canada and Japan were able to buck this trend for different reasons. In Canada, returns were positive due to its large energy sector weighting. In Japan, positive returns reflected enthusiasm around its pro-growth mandate.

There were a lot of good things happening around the world just prior to the outbreak of the conflict involving Iran. Economic indicators had improved, corporate earnings revisions had turned positive in many parts of the world, and stock market performance had broadened out to more sectors. Corporate earnings were revised higher across most geographic regions, with Europe being the notable exception

Eurozone business activity accelerated faster than forecast in February as manufacturing swung back to growth for the first time since October. The Bank of Japan’s quarterly Tankan survey, a measure of manufacturer optimism, reached its highest level since Q4 2021. The global Purchasing Managers Index also turned up in the early part of 2026.

Our base case is that the war with Iran will be short-lived. President Trump has shown a tendency to respond to market stress, and U.S. midterm elections in the fall are an added incentive for him to de-escalate the conflict and come to a resolution. We are monitoring the situation carefully and will make adjustments to our portfolios as needed.

New positions added to the Global Strategy:

Investor AB is a leading Nordic industrial holding company with stakes in global firms such as Atlas Copco, ABB, and AstraZeneca. Its business model centres on active ownership and long-term operational excellence. We are attracted to its high-quality assets, disciplined approach, and strong long-term track record.

Hoya Corporation is a global med-tech and high-tech company with leading positions in eyeglass lenses, medical endoscopes, and semiconductor mask blanks. We are attracted to its dominant niche market positions and its consistent ability to generate high returns through disciplined capital allocation.

ASML Holding is the world’s sole provider of extreme ultraviolet lithography machines, making it a critical partner to the global semiconductor industry. We view the company as an indispensable supplier to leading chipmakers and a key beneficiary of continued investment in artificial intelligence.

Ferguson is the leading North American distributor of plumbing, heating, and pipe, valves, and fittings products. We are attracted to its scale advantages in a highly fragmented industry, which have consistently allowed it to capture market share from smaller local distributors.

Union Pacific Corporation operates one of the largest rail networks in North America, connecting 23 states across the western two-thirds of the United States. We are attracted to its high barriers to entry and the strength of its irreplaceable physical infrastructure.

Itochu Corporation is a premier Japanese trading company with a strong non-resource bias and meaningful exposure to stable consumer and retail segments. We are attracted to its resilient cash flow generation, diversified global footprint, and shareholder-friendly policy, including progressive dividends and frequent share buybacks.

Erste Group Bank is a leading financial services provider in the eastern part of the European Union, serving more than 16 million customers. We are attracted to its exposure to faster-growing Central and Eastern European economies, robust capital position, and conservative risk profile.

 

New positions added to the International Strategy:

BAWAG Group AG has transformed into one of the most efficient retail-focused banks in Europe with one of the lowest cost/income ratios in European banking. They complement organic growth with acquisitions and they continue to generate excess capital for share repurchases and future acquisitions.

DBS Group is the largest Southeast Asian Bank by assets with a 50% share in its native Singapore market and an increasing presence across Asia, particularly India and Indonesia. The company has strong exposure to trade flows across Asia along with a growing wealth management business.

Rakuten Bank is the fastest growing digital bank in Japan and well positioned to capitalize on the growing trend to cashless in Japan. The company will benefit from rising yields in Japan as the Bank of Japan is expected to increase interest rates twice this year.

Konami Group is a diversified entertainment giant. The company is the leading game developer and publisher in Japan. We expect it to deliver mid-teens earnings growth over the mid-term.

InterContinental Hotels Group operates an asset-light business model, focusing on franchising and managing hotels across a brand portfolio that includes Holiday Inn, Regent, and Crowne Plaza. With 342,000 rooms and a franchise model that drives high returns, we are positive on the long-term growth of the company.

Roche Holding is uniquely structured with two highly synergistic divisions: Pharmaceuticals and Diagnostics, We expect continued strong sales growth within pharma, and the diagnostics division should accelerate growth to mid-high single digits.

Nomura Research Institute Ltd is Japan’s first private think tank and a premier provider of IT solutions and consulting with a strong presence in Japan’s financial
sector. We expect mid-to-high single-digit revenue growth over the mid-term leading to strong and reliable earnings growth.

Tokyo Electron is a global leader in Semiconductor Production Equipment (SPE). With long-term low double-digit earnings growth driven by a strong backdrop for semiconductors, we remain positive on the outlook for Tokyo Electron.

Addtech sells components and systems across automation, electrification, energy, and industrial markets in Europe. The company has delivered strong low double-digit growth through organic expansion and bolt-on acquisitions. We believe its decentralized model and niche-market focus support attractive long-term prospects.

ALS is a global leader in testing, inspection, and certification services. The company is positioned to benefit from higher mining exploration as gold and metals prices rise. We believe its exposure to commodities and strong M&A pipeline support appealing growth in the current environment.

Daifuku is a leader in materials handling and automated logistics. The company is benefiting from manufacturing reshoring, labour-driven logistics automation, and AI data centre demand. We believe its leadership in semiconductor conveyance and growing services revenue support strong long-term growth.

Rheinmetall is a leading European defense company. Rising defense spending and German stimulus provide a strong tailwind for growth. We believe expanding capacity and the divestment of its auto business will allow the company to focus on its most attractive opportunities.

Boliden is a metals and mining company with operations in politically stable regions. Its smelting business provides stability, while rising demand for metals should support earnings growth. We believe steady operations and expansion of existing mines provide attractive upside.

Italgas is a leading gas distributor in Italy and Greece. The company is rolling out smart meters across its customer base and has expanded into water services and energy efficiency. We believe its core distribution business and new growth areas support attractive long-term prospects.

 A detailed review of each company can be found in the full report per the link above.

 

 Fixed Income Update