Thursday, 3/19/2026 p.m.

• Markets close lower amid energy supply concerns – The TSX and U.S. equity markets finished lower on Thursday, with pullbacks in materials and consumer discretionary stocks leading the decline. In international markets, Asia and Europe were also down. In energy markets, WTI oil pulled back from its recent high as Israel's Prime Minister commented that Israel would support U.S. efforts to reopen the Strait of Hormuz. Despite near-term volatility, we continue to see opportunities across markets and asset classes. Within equities, we favor U.S. large- and mid-cap stocks, supported by robust AI‑related capital investment and steady U.S. economic growth. We think the recent pullback in international markets could present an attractive entry point for long‑term investors. We favor overseas developed small‑ and mid‑caps and emerging‑market equities, which could benefit from relatively attractive valuations and healthy global earnings growth expected in 2026. Within fixed income, international bonds can add diversification through exposure to different economic and interest-rate cycles, while emerging-market debt may also enhance income.
   
• Jobless claims lower than expected – U.S. initial jobless claims ticked down to 205,000 this past week, below the 215,000 consensus. Continuing claims — reflecting the total number of people receiving benefits — rose modestly to 1.86 million, as expected, suggesting some workers are taking longer to find new employment. We think these trends remain consistent with a stabilizing labour market. Slower job creation alongside a moderate pace of layoffs should help keep wage gains running above inflation. However elevated oil prices could push inflation higher, at least temporarily, potentially raising the bar for real wage gains.
   
• Bond yields mixed – Bond yields were mixed, with the 10-year Government of Canada yield up to 3.44% and the 10-year U.S. Treasury yield down near 4.26%. However, the broader trend in recent weeks has been higher. Over half of that increase is attributable to rising inflation expectations, a key component of bond yields. Market-implied 10-year inflation expectations in U.S. Treasury Inflation Protected Securities (TIPS) markets have climbed about 15 basis points (0.15%) this month to 2.4%. Bond markets are also reflecting the view that higher inflation — partially influenced by rising oil prices — could delay Fed rate cuts. Markets have pushed back the implied timing for the next rate cut out to September 2027, followed by another in December*. That would represent a slower pace of easing than the Fed's latest projections released just yesterday**. We think the Fed remains positioned to continue cutting rates, though the path will likely be gradual. The steady labor backdrop should allow policymakers more time to confirm that the Fed's preferred personal consumption expenditures (PCE) inflation — currently 2.8% — is easing sustainably toward the 2% target before proceeding with additional cuts.

Brian Therien, CFA ;
Investment Strategy

^{Source for all data not cited: FactSet. Source for data cited: *CME FedWatch **U.S. Federal Reserve}

Wednesday, 3/18/2026 p.m.

• Markets close lower as central banks holds rates steady – The TSX and U.S. equity markets finished lower on Wednesday, as producer price inflation through February came in hotter than expected at 3.4% annualized. Declines in consumer staples and consumer discretionary stocks led the pullback. In international markets, Asia finished higher overnight — led by South Korea's Kospi index — while Europe was down. The U.S. dollar strengthened against major currencies, as investors likely seek the relative stability of the world's reserve currency. In energy markets, WTI oil traded higher as disruptions in the Strait of Hormuz and attacks on energy infrastructure in the Middle East constrain supply. We continue to see opportunities across markets and asset classes. Within equities, we favor U.S. large- and mid-cap stocks, which we believe stand to benefit from their higher quality and broadening leadership. We also see potential in international developed small- and mid-cap and emerging-market equities, supported by global economic resilience and relatively attractive valuations. Within fixed income, we think international bonds can add diversification through exposure to different economic and interest-rate cycles, while emerging-market debt may also enhance income.
   
• Bank of Canada and Fed holds rates steady, as expected - Bank of Canada concluded its March meeting today, holding its policy rate steady at 2.25%, as expected. Policymakers noted that risks to growth look tilted to the downside, while inflation risks have risen due to higher energy prices*. The Federal Open Market Committee (FOMC) also finished its March meeting today, holding the target range for the federal funds rate steady at 3.5%-3.75%, in line with forecasts. The Fed also updated its quarterly projections, maintaining its expectations for the Fed funds rate, still indicating one cut this year and another next year. FOMC hiked its outlook for inflation for 2026 and 2027, citing the temporary impact of higher oil prices and lingering tariff effects, while upgrading its estimate on stronger expected productivity. Monetary policy appears roughly neutral, with the fed funds rate near 3.65% and the Fed's preferred personal consumption expenditure (PCE) inflation measure at 2.8%. A neutral policy rate is generally estimated to be 0.75%-1% above inflation**. Bond yields rose, with the 10-year Government of Canada yield at 3.44% and the 10-year U.S. Treasury yield at 4.27%. We still think the Fed remains on its rate-cutting path, likely moving the policy rate into the 3.25%-3.5% range by year-end. However, the labour market that is characterized by slower hiring and fewer layoffs should give policymakers more time to confirm that PCE is cooling sustainably toward the 2% target before delivering additional cuts. Additional monetary policy easing should help gradually reduce borrowing costs for households and businesses, likely supporting consumer spending and corporate earnings.
   
• Producer price inflation higher than expected – U.S. producer price index (PPI) inflation rose to 3.4% annualized through February, above expectations to hold steady at 2.7%. More than half of the February rise in wholesale prices were attributable to services, which are up 3.8% year-over-year. We believe these readings indicate that inflation pressures remain sticky. Wholesale inflation is now significantly higher than CPI at 2.4%, even before factoring in higher energy prices. Because some components of PPI feed through to PCE, the Fed is likely to remain cautious over the near-term, in our view.

Brian Therien, CFA ;
Investment Strategy

^{Source for all data not cited: FactSet. Source for data cited: *Bank of Canada ** Federal Reserve Bank of New York}

Tuesday, 3/17/2026 p.m.

• Markets build on Monday's rally – Equity and bond markets moved tentatively higher today despite a rise in oil prices, building on the improvement in sentiment seen yesterday. WTI hit $96 per barrel at close despite bullish comments from President Trump that the conflict in Iran was moving way ahead of schedule, with markets reacting to news of attacks on energy infrastructure in the Middle East overnight. The S&P 500 index was up 0.3% over the day, with the small cap Russel 2000 index reporting a firmer 0.7% gain, although the Canadian S&P/TSX index was flat. A generally more upbeat tone continues to help push bond yields lower, with the 10-year U.S. Treasury note down 2 basis point today (0.02%) while the Canadian 10-year fell 4 basis points (0.04%) and is now down 13 basis points over the week so far (0.13%). Finally, we are seeing the U.S. dollar give back some of the safe-haven driven gains seen during the latest geopolitical shock, with the greenback now down 0.75% from its peak against a basket of trade weighted currencies.
   
• Gas prices continue to rise – Elevated oil prices continue to translate into higher prices at the pump for American households. The daily national average unleaded gasoline price has now risen to $3.80 per gallon, a full dollar higher than the 2026 low seen in January. In those states with the highest gas prices, like California, the cost of gas hit $5.50 yesterday. This means that the average cost of filling the tank of a midsize SUV in the U.S has risen by around $15 so far during the Iran crisis, and further increases are possible as we continue to see a pass through from higher crude oil. Then good news is that gas accounts for just 3% of total consumer spending according to weights used in the CPI basket, around half the share seen a decade ago on account of lower prices and shifting consumption patterns. However, higher energy prices will be felt across other inflation components, with diesel prices, a key input for freight, agriculture and construction, rising above $5 per gallon for the first time since 2022. The hope is that a relatively short-lived spike in these costs will limit their size, persistence and economic/market implications.
   
• Central banks in focus – We will get a sense of central bank reactions to the oil price shock this week amid a flood of central bank meetings. The Fed will garner most attention, with markets having responded to the spike in oil prices by trimming expectations for interest rate cuts, with current pricing pointing to just one 25 basis point (0.25%) cut later this year. This is consistent with forecasts provided by FOMC members back in December, and it will be interesting to see if the committee's median forecast at this meeting continues to point to at least some further policy easing in 2026. We think a spike in short term inflation will make the Fed more cautious around cuts in coming months, but still see room for a cut later this year should oil prices moderate from here. Elsewhere, we look forward to central bank meetings in Europe (UK, Eurozone, Sweden) and Japan, with market attention turning to potential hikes in these markets. We suspect these central banks will tread carefully given the potential fragility of local growth to higher oil prices, even as inflation spikes in the short term. The same dynamic applies in Canada, where the Bank of Canada will meet this week, and we do not expect policy tightening this year given signs of weak domestic activity rates.

James McCann ;
Investment Strategy

^{Source for all data: Bloomberg, FactSet.} 

Monday, 3/16/2026 p.m.

• Stocks and bonds bounce on lower oil – Markets started the week on the front foot helped by a decline in WTI oil to $94 per barrel. The dip in oil prices reflected rising hopes that more oil tankers will be able to traverse the Strait of Hormuz, with the U.S. allowing Iran to ship its oil through this channel. President Trump meanwhile called on U.S. allies to send warships to help escort tariff through the Strait, although none have, as yet, offered this support. Finally, the International Energy Agency has signaled that it could release more energy reserves if needed. The S&P 500 index jumped 1% over the session bringing the decline in this U.S. benchmark large cap index to just over 2% year-to-date, while the Canadian S&P/TSX index was similarly strong today, bringing the year-to-date gain to 3.5%. Lower oil prices also provided some relief in bond markets which have struggled in recent weeks, with a rally across the yield curve helping push yields on U.S. government bonds 4-5 basis points lower (0.04%-0.05%). This rally was even larger in Canada, with bonds also benefitting from weaker than expected inflation data. Finally, the U.S. dollar, which has performed well during the latest geopolitical shock, depreciated today amid a more upbeat tone in markets.
   
• Signs of improving manufacturing momentum – before the latest shock – The manufacturing sector built on its strong start to 2026 in February, with output up 0.2%m/m, adding to an upward revised 0.8%m/m gain in January. This matches the better tone we have seen reported in manufacturing survey data, with the ISM manufacturing PMI pointing to a renewed expansion in a sector hit by trade policy uncertainty last year. More broadly, Q1 U.S. GDP growth looks to be tracking a strong start to the year through January and February data, with fading in government shutdown disruptions also likely to boost growth. However, it remains to be seen how large a dent to short term activity the latest oil shock, and uncertainty around the geopolitical outlook, will generate. The Empire State manufacturing sentiment survey for March deteriorated more than expected this morning, although this was driven by worse current conditions as opposed to expectations for future activity. We will be watching a wider sweep of survey data this month to try and understand how businesses are reacting to the threat of higher energy prices. In Canada, headline inflation fell sharply in February to 1.8%y/y from 2.3%y/y, while core inflation excluding energy and food prices edged down to 2%. However, this good news is tempered by a likely rebound in headline inflation coming in March on the back of higher oil prices. The Bank of Canada faces a difficult balancing act, with recent indicators pointing to sluggish growth and labour market activity, alongside these renewed price pressures. Against this backdrop we continue to expect the central bank to leave interest rates on hold amid this year.
   
• Fed in focus this week – The Fed meets on Wednesday in the face of uncertainty over the outlook for oil and associated short term inflation pressures. Markets have responded to the spike in oil prices seen thus far by trimming their expectations for interest rate cuts, with current pricing pointing to just one 25 basis point (0.25%) rate cut later this year. This is consistent with the forecasts provided by FOMC members back in December, and it will be interesting to see if the committee's median forecast at this meeting continues to point to at least some further policy easing. Additionally, we will be listening carefully for hints from Chair Powell around how the Fed might balance the upside risk to inflation and downside risk to growth from an oil price shock. However, there are a couple of reasons to take signals from this meeting with a pinch of last. First, a swing in oil prices in either direction could quickly change the Fed's thinking, and second, markets might slightly discount messages from Powell Chair given this will be one of the last of his term.

James McCann ;
Investment Strategy

^{Source for all data: Bloomberg, FactSet, Atlanta Fed.} 

Friday, 3/13/2026 p.m.

• Stocks slide again – Markets closed the week on a soft note amid further signs of an escalation in the conflict in Iran. The S&P 500 index erased a near 1% gain earlier in the day to close 0.6% lower, continuing a run of steady declines over recent sessions. Bonds meanwhile were mixed at the close of what has been a difficult week in sovereign debt markets. The yield on the U.S. 10-year Treasury note finished two basis points higher (0.02%) after a further sell-off, while a rally in the shorter-dated two-year note helped push yields one basis point lower (0.01%), helped by rising expectations for Fed rate cuts after softer-than-expected fourth-quarter GDP data. In Canada bonds performed well across the yield curve in the wake of a weak labour report. WTI oil is trading at $99 per barrel, with investors continuing to closely monitor disruptions to global energy supplies through the Strait of Hormuz.
   
• An ugly labour-market report – The Canadian economy shed the most jobs in more than four years last month, in what was a surprisingly weak labour report. Headline employment fell by a full 84,000 over February, driven by a decline in full time employment of more than 100,000. This adds to a decline in jobs of 25,000 in January. Weakness in the Canadian labour market last year had been heavily concentrated in the manufacturing and trade sectors, sensitive to rising trade tensions with the U.S. However, today's report showed a sharp decline in employment in wholesale and retail trade, indicating broader-based weakness. The fall in jobs helped push up the unemployment rate to 6.7%, which remains below the recent peak but still elevated. These data point to an economy still struggling in the face of last year's trade war with the U.S., in our view, with uncertainty around trade policy likely to remain elevated through the renegotiation of the CVUSMA trade deal this year.
   
• A tricky balancing act for the Bank of Canada – The market had increasingly been speculating that the Bank of Canada could hike interest rates this year, with higher energy prices set to push inflation higher. However, today's report has pushed back on these expectations and helps highlight the tricky balancing act facing the central bank, with inflation to move above target while growth remains soft. We think the Bank of Canada will remain on hold this year, essentially looking through the rise in price growth to instead keep policy supportive against the backdrop of a weak economy. Fed interest-rate expectations have also been sensitive to oil prices. Markets have been pricing out expectations for Fed easing, even if we are seeing a small reversal in this trend this morning. Current pricing suggests that the Fed will cut just once more this year, down from an expectation for two or more cuts at the end of February. The Fed seems unlikely to give strong guidance around next steps at its meeting next week, given the heightened uncertainty at present. However, markets might be sensitive to some of the hints it provides around how it might view the risks to inflation from an energy price shock, and how it might balance that risk against the hit to growth likely from higher prices.

James McCann ;
Investment Strategy

^{Source for all data: Bloomberg, FactSet.}