• Stocks add to the rally on optimism that the end of the war is near - Major equity indexes begun the new month and quarter on a higher note, adding to yesterday’s TSX rally, the strongest since April 9, 2025. The move has been supported by U.S. President Trump’s comments suggesting that the war with Iran could be over within two to three weeks, with the U.S. potentially stepping away regardless of whether a deal is reached with the current regime. The U.S. president is scheduled to deliver a national address tonight focused on Iran. While details remain unclear, markets appear to be pricing in a degree of de-escalation. WTI crude oil prices dropped slightly below $100 per barrel, down about 1.8% from yesterday on the news, although traffic through the Strait of Hormuz remains near a standstill. Meanwhile, Canada and U.S. government bond yields rose after recent U.S. economic data surprised to the upside.
   
• U.S. economic data highlight solid trends heading into the energy price spike - February U.S. retail sales rose 0.6% month-over-month, exceeding consensus expectations for a 0.5% gain and accelerating to the highest pace since July 2025. Control group retail sales, which better capture core consumer spending trends and feed directly into GDP, also increased a strong 0.5%. Together, the data help reinforce the narrative of a resilient consumer heading into the March headwind from sharply higher gasoline prices. On the employment front, U.S. companies added more jobs than expected last month, with private payrolls increasing by 62,000 versus expectations for 40,000, suggesting the labour market may be stabilizing. Most of the private sector hiring was still led by the education and health services sectors, which have been responsible for the majority of job creation in the last year. Pay growth for job-stayers was unchanged for the third month at 4.5%, while pay growth for job-changers accelerated to 6.6% from February's 6.3%.
   
• Diversification helped portfolios better weather first-quarter volatility – While the TSX benefited from the resource-heavy tilt, most major U.S. indexes declined in the first quarter, a period marked by headline-driven volatility and shifting market leadership. Early in the quarter, stocks traded within a narrow range before breaking down amid escalating conflict in the Middle East and the resulting energy supply shock. The S&P 500 posted a quarterly decline after three consecutive quarters of gains. Notably, however, the equal-weight S&P 500 finished the quarter in positive territory, as did small- and mid-cap stocks. Overseas equities also outperformed in Canada-dollar terms, with emerging-market stocks ending the quarter with a slight gain. Beneath the surface, key themes included continued AI-driven disruption, a rotation away from mega-cap technology stocks, and a reduction in expectations for Federal Reserve rate cuts. Energy and materials led the TSX, while technology and real estate sectors lagged. As we turn the page to the second quarter, much of the headline uncertainty remains. That said, we believe relatively steady economic growth and rising earnings can provide support, with diversification continuing to help smooth periods of market volatility.

Angelo Kourkafas, CFA ;
Investment Strategy

^{Source for all data: Bloomberg.} 

• Stocks trade higher on hopes for an off-ramp to the conflict in Iran – North American equity markets traded higher on Tuesday, supported by reports that U.S. President Trump stated he is willing to end military operations in Iran, even if the Strait of Hormuz remains closed. From a leadership perspective, most sectors of the S&P 500 finished the day in positive territory, led by technology and communication services, which each gained over 4%. Strong performance in these sectors led to a 3.8% gain in the Nasdaq, while the TSX and S&P 500 notched gains of 2.5% and 2.9%, respectively. Bond yields closed modestly lower, with the 10-year Government of Canada yield at 3.44% and the 10-year U.S. Treasury yield at 4.32%. While optimism around a potential off-ramp to the conflict provided support for equity markets, oil prices were only modestly lower and remain above $100 per barrel, reflecting continued uncertainty surrounding the timing and path to reopening the Strait of Hormuz. On the economic front, Statistics Canada reported that real GDP rose by 0.1% in January, modestly exceeding the initial estimate that had called for a flat reading. Meanwhile, the advance estimate for February points to monthly growth of 0.2%.
   
• Markets remain headline-driven – Developments related to the conflict in Iran continue to be the primary driver of market performance. Most recently, reports suggest the U.S. may be willing to end its military operations in Iran, even if the Strait of Hormuz remains largely closed. Equity markets have responded positively on optimism around a potential near-term off-ramp, while bond yields have moved lower. However, uncertainty persists following reports that Iran struck an oil tanker off the coast of Dubai. In addition, oil tanker traffic through the Strait of Hormuz has slowed to a crawl, and the timeline and path for reopening remains uncertain. Reflecting these risks, oil prices were only modestly lower on Tuesday, with crude oil still holding just above $100 per barrel. We expect markets to remain sensitive to conflict-related headlines in the coming weeks, and volatility may persist. That said, we believe the recent pullback in equity markets could create attractive opportunities for long-term investors. In our view, U.S. equities appear well positioned, supported by healthy profit growth, continued investment in artificial intelligence (AI), and resilience in the U.S. economy. We also see opportunities in overseas developed small- and mid-cap equities, which we believe offer relatively attractive valuations, as well as in emerging-market equities that could benefit from sustained enthusiasm around AI.
   
• U.S. labour-market data in focus – U.S. labour-market data will be in focus for investors for the remainder of the week, with JOLTS job openings for February in line with expectations this morning, ADP employment data for March due Wednesday, and the March nonfarm-payrolls and unemployment report scheduled for Friday. Labour-market conditions have eased from the historically tight levels seen in the immediate post-pandemic period but remain healthy, in our view. Conditions are characterized by modest job growth and limited signs of elevated layoffs. Reflecting this trend, nonfarm-payroll growth slowed to a three-month average of roughly 6,000 jobs as of February. However, indicators of job losses remain contained, with the unemployment rate holding at 4.4% and initial jobless claims averaging 213,000 in 2026—well below the 30-year average of more than 300,000. We expect modest job growth in the U.S. to persist through 2026. Coupled with low levels of layoffs and slowing labour-force growth—potentially reflecting tighter immigration policy—we believe the U.S. unemployment rate is likely to remain contained around 4.5%. In our view, this backdrop should remain broadly supportive of household spending.

Brock Weimer, CFA ;
Investment Strategy

^{Source for all data: FactSet.} 

• Markets start the week lower on higher energy prices – The TSX and U.S. equity markets gave back earlier gains to close lower on Monday, as weakness in technology and industrials weighed on performance. In international markets, Asia was down overnight, while Europe rose as economic and consumer confidence data for March came in roughly in line with estimates. The U.S. dollar strengthened, likely supported by its liquidity and perceived stability as the global reserve currency. While we acknowledge near-term geopolitical uncertainty and market volatility, we see opportunities across markets and asset classes. Within equities, we favour U.S. large- and mid-cap stocks, which we believe should benefit from their quality, technology exposure and broadening leadership. We also see potential in international developed small- and mid-cap equities, supported by global economic resilience and relatively attractive valuations. Emerging-market equities may also offer opportunity, as they have historically performed well during Fed easing cycles and can offer meaningful exposure to technology innovation. At a sector level, we favour the energy, industrials and materials sectors, offset by underweight positions in communication, consumer discretionary, consumer staples and technology as part of our opportunistic equity sector guidance. 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.
   
• Oil prices extend their rise – In energy markets, WTI oil climbed above $104 per barrel for the first time since 2022 amid ongoing disruptions in the Strait of Hormuz. Despite the recent rise, U.S. and Canadian rig counts have dropped in recent weeks*. That likely reflects producer caution and reluctance to materially increase drilling activity in response to what could still prove to be a short-term shock. Energy futures imply WTI oil prices may retreat toward the mid-$70 range by year-end, potentially reinforcing this concern.
   
• Bond yields edge lower – Bond yields declined from recent highs, with the 10-year Government of Canada yield at 3.52% and the 10-year U.S. Treasury yield near 4.35%. Most of the increase since the February lows has been tied to the prospect 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 late 2027**, a materially slower pace of easing than the Fed's latest projections, which indicate one cut this year, followed by another next year***. A smaller portion of the recent rise reflects higher inflation expectations, a key component of bond yields. We think the Fed remains in its easing cycle, though the path will likely be more gradual. In our view, the steady labour backdrop should allow policymakers more time to confirm that the Fed's preferred inflation gauge — the personal consumption expenditures (PCE) price index — is easing sustainably toward the 2% target before proceeding with additional cuts. We think the Bank of Canada will remain on hold in the near term with its policy rate at the low end of the bank's 2.25%-3.25% estimate for neutral rates. On a positive note, higher yields improve income potential, the primary driver of bond returns. In addition, any easing in inflation expectations could lift bond prices, which move inversely to yields.

Brian Therien, CFA ;
Investment Strategy

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

• Markets close mixed as oil prices extend their rise – The TSX finished higher, while U.S. equity markets were weaker on Friday, led lower by consumer discretionary and financials stocks. Energy was again the top-performing sector, continuing its leadership from the start of the year, boosted by higher oil prices. In international markets, Asia was mixed overnight, while Europe was down. In energy markets, Western Canadian Select and WTI oil traded higher amid ongoing disruptions in the Strait of Hormuz. Despite near-term volatility, we continue to see opportunities across markets and asset classes. Within equities, we favour U.S. large- and mid-cap stocks, which we believe should benefit from their quality and broadening leadership. We also see potential in overseas developed small- and mid-cap and emerging-market equities, supported by global economic resilience and relatively attractive valuations. At a sector level, we favour the energy, industrials and materials sectors, offset by underweight positions in communication, consumer discretionary, consumer staples and technology as part of our opportunistic equity sector guidance. 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.
   
• Consumer sentiment softens – The final University of Michigan consumer sentiment index for March was revised down to 53.3, below expectations of 54.0. Survey responses indicated that rising gas prices and volatile financial markets were key factors behind the dip*. Sentiment was pressured by inflation expectations over the next year, which rose to 3.8%, from 3.4% the prior month*, suggesting consumers may be concerned that price pressures could persist over the near term. That said, long-term consumer inflation expectations edged down to 3.2%*, likely indicating that households believe that higher inflation will not become entrenched.
   
• Bond yields move higher – Bond yields extended their recent rise, with the 10-year Government of Canada yield at 3.58% and the 10-year U.S. Treasury yield near 4.43%. Most of the increase since the February lows is tied to the prospect 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 December 2027**, a materially slower pace of easing than the Fed's latest projections, which indicate one cut this year, followed by another next year***. A smaller portion of the recent rise reflects higher inflation expectations, a key component of bond yields. We think the Fed remains in its easing cycle, though the path will likely be more gradual. In our view, the steady labour backdrop should allow policymakers more time to confirm that the Fed's preferred inflation gauge — the personal consumption expenditures (PCE) price index — is easing sustainably toward the 2% target before proceeding with additional cuts. We think the Bank of Canada will remain on hold in the near term with its policy rate at the low end of the bank's 2.25%-3.25% estimate for neutral rates. On a positive note, higher yields improve income potential, the primary driver of bond returns. In addition, any easing in inflation expectations could lift bond prices, which move inversely to yields.

Brian Therien, CFA ;
Investment Strategy

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

• Stocks close sharply lower as oil prices rise – Stock markets were notably weaker today, with the Nasdaq leading the decline at about -2.4%, compared with roughly -1.7% for the S&P 500 and -1.5% for the Canadian TSX. The move lower was driven by a renewed rise in oil prices and worsening sentiment around Middle East negotiations, as mixed signals on a possible ceasefire and tougher rhetoric toward Iran revived concerns about supply disruption, inflation pressure, and a longer period of policy caution. U.S. Treasury yields moved higher alongside that shift in sentiment, with the 10-year Treasury yield rising about 0.1% to 4.43%, reflecting reduced optimism on de-escalation and lingering inflation worries. Abroad, global equity markets also reflected a more defensive tone, with Europe’s Stoxx 600 closing 1.2% lower, while Asian markets were mixed overnight as investors weighed the same geopolitical and energy-related risks. Stepping back, the broader backdrop still suggests an oil-driven shock that is likely to be growth-negative and inflation-positive, but not necessarily a repeat of past energy crises given a less oil-intensive economy and relatively solid underlying fundamentals. Overall, volatility may remain elevated in the near term, but if energy prices eventually stabilize, we think the larger picture still points to modest slowing rather than a deeper downturn, with resilience in the underlying economy helping to cushion markets over time.
   
• Why this is not a 1970s-style energy crisis – While the Iran conflict has created a major oil shock, today’s backdrop is fundamentally different from the one that produced the stagflation of the 1970s for several reasons. Energy is a smaller drag on consumers than it used to be: In the U.S., energy spending as a share of total consumer spending is materially lower than it was during the 1970s and early 1980s (roughly 2% today versus about 6% then), suggesting that the direct hit to household purchasing power from a given oil shock is smaller today. The U.S. is far more insulated on the supply side: The U.S. has been a net exporter of oil since 2019, and domestic natural-gas prices have remained relatively insulated from the disruption, even as Europe and Asia face a supply crunch. U.S. shale producers stand to benefit from higher prices, even if that support does not fully offset the drag from weaker consumer spending. Oil still matters, but less in a services-based economy: Large oil-price moves still hurt, but the global economy is less oil-intensive than it was during the original energy crisis. Since 1950, the amount of energy required to produce one unit of GDP has fallen by roughly 70%, reflecting efficiency gains and the growing importance of the services sector.
   
• Broadening leadership a key theme of the first quarter – After three consecutive years of strong performance by U.S. technology and growth-style stocks, market leadership has broadened in the first quarter of 2026. Year-to-date, the energy sector has been the top performer of the S&P 500, rising more than 35%. Industrials, materials, utilities, and consumer staples have also posted gains of more than 5%. Meanwhile, technology, communication services, and consumer discretionary have been among the laggards, each declining more than 5%. In Canada, the energy sector of the TSX has also led the way, higher by over 25% this year, whereas technology has lagged, declining over 20%. In our view, diversification will be critical for investors over the remainder of the year. In Canada, we recommend investors consider overweighting the energy, industrials and materials sectors, offset by underweights to technology, consumer discretionary, consumer staples and communication services. In the U.S., we favour the consumer discretionary and industrials sectors, offset with underweights to utilities and consumer staples.

Mona Mahajan ;
Investment Strategy

^{Source for all data: FactSet.}