Geopolitics continue to dominate the narrative for financial markets and major economies through the first quarter of 2026.

After weeks of trading deadlines and escalating rhetoric, the U.S. and Iran reached a temporary ceasefire contingent on Tehran reopening the Strait of Hormuz to commercial shipping. While the ceasefire appears fragile, the agreement has reduced the likelihood of worst-case economic outcomes stemming from a severe disruption to energy markets. The equity markets responded constructively: equities recovered a portion of recent losses, oil prices pulled back, and bond yields declined. Lower energy costs, if sustained, should ease pressure on consumers and businesses, moderating concerns around the inflation backdrop and earnings outlook.

Despite the collective sigh of relief, the prudent interpretation is likely “less bad” rather than “problem resolved.” The ceasefire provides time for both sides to find common ground and, ideally, a framework that lets each claim a version of a win.

What remains to be determined is whether the headwinds give way to a gradual normalization or renewed disruptions. Should the ceasefire hold and eventually become permanent, we believe the most likely outcome remains a period of slower growth with somewhat elevated inflation, before conditions improve later in the year.

The economy and markets remain in a “stress testing” phase, but the ceasefire represents an encouraging step toward stability. A key indicator to monitor is the normalization of shipping activity through the Strait of Hormuz, which would signal improving commodity supply constraints. While periods of rapid news cycles and sharp price swings in both directions can challenge investor confidence, these moments underscore the importance of maintaining a balanced perspective. We believe portfolio allocations should be closely aligned to long-term target weights, while acknowledging that markets may experience renewed bouts of volatility as U.S.-Iran negotiations unfold.

At a portfolio level, we have acted opportunistically on the strong rise in the commodities to trim back some of our resource positions. This is not a reflection of the quality of the individual resource companies we own. This was simply taking advantage of the macro event driving resource companies higher.

Additionally, we saw another strong quarter for dividend increases. In the first quarter of 2026, we saw 13 dividend increases which follows on a strong result of dividend increases in 2025.

We continue to watch the geopolitical events closely, with the hope for de-escalation and ultimately a resolution to the events in the Middle East.  

As always, feel free to reach out to our team with any questions you may have.