Daniel Kelly
Senior Portfolio Manager
April 20, 2026
Given current events, this isn’t the time to rush decisions. Instead, we’re adopting patience and discipline during this unusually complex environment. We have positioned portfolios to reflect this and are adjusting as conditions evolve.
Strategy Update Highlights
- Our defensive positioning is helping mitigate the short-term impacts of recent geopolitical developments, including tensions in the Middle East.
- Approximately 25% of our Canadian equity exposure is protected until May 15, and 40% of our U.S. equity exposure (for portfolios with more than $80,000 in U.S. holdings) is protected through strategies designed to reduce downside risk. We expect to extend this protection to a portion of this U.S. protection.
- U.S. interest rates are expected to decline by approximately 25 basis points in 2026, while Canadian rates are expected to remain on hold.
Fixed Income
Interest rates have moved higher over the past month, leading to a pullback in bond prices from recent highs. Elevated geopolitical uncertainty contributed to increased volatility in bond markets, particularly leading up to the recent ceasefire. Following this, markets stabilized and partially recovered, although not to prior peak levels.
Earlier this year, we expected one to two U.S. rate cuts. That outlook has since moderated, and we now expect approximately one 25 basis point reduction. Given ongoing uncertainty, there remains a possibility that rate cuts may be delayed or not occur in 2026. In Canada, current expectations are for rates to remain on hold for the remainder of the year.
We maintained our overall fixed income exposure. Within the allocation, we further reduced preferred share exposure and modestly increased our position in PIMCO Monthly Income. For short-term liquidity, we continued to roll Government of Canada short-term bonds as needed.
We expect to gradually increase our allocation to long-short alternative fixed income strategies. One such strategy, from RPIA, is structured to convert a portion of interest income into capital gains, enhancing tax efficiency in taxable accounts given the more favourable tax treatment of capital gains relative to interest income.
This positioning reflects our focus on maintaining flexibility and after-tax efficiency in the changing interest rate environment. Our fixed income strategy continues to include a combination of ETFs, actively managed mandates, and alternative investments.
Equities
We positioned portfolios defensively ahead of recent geopolitical developments, which helped mitigate some of the resulting market volatility.
We currently maintain approximately 25% downside protection on our Canadian equity exposure (against a decline of 14% or greater) and approximately 40% protection on U.S. dollar-based portfolios with equity holdings exceeding $80,000 USD. We are closely monitoring conditions.
Trade policy uncertainty, combined with geopolitical developments in the Middle East, continues to increase market volatility and risk. The full impact of potential disruptions to global energy and resource supply chains remains uncertain. While Canada and the United States have substantial domestic energy resources, they are not fully insulated from global effects.
We remain underweight equities and hold elevated cash levels, allowing us to deploy capital as opportunities arise. While this may modestly impact short-term returns, it helps reduce volatility—an important consideration, particularly for newer clients.
While we focus on long-term returns, we place equal emphasis on managing downside risk—an approach that has supported more stable returns with lower volatility for over 25 years.
For more analysis, click on my Winter 2026 Strategy Update and read the equity section as that continues to apply to this quarter.
Given ongoing geopolitical and trade uncertainty, we maintain a cautious stance.
Conclusion
We continue to manage portfolios with a disciplined and watchful approach and will actively seek opportunities in the quarters ahead.
Thank you for your continued trust and confidence. Please don’t hesitate to reach out—we are always available by phone, Webex, or in person.
** Here’s the fine print and there’s a lot of it…
Currency can add return when the Canadian dollar goes down but reduce returns when the Canadian dollar goes up for non-currency hedged US and international investments. Also, please remember that your US accounts report values in US dollars.
Securities or investment strategies mentioned in this newsletter may not be suitable for all investors or portfolios. The information contained in this strategy update is not intended as a recommendation directed to a particular investor or class of investors and is not intended as a recommendation in view of the particular circumstances of a specific investor, class of investors or a specific portfolio. Options, and other strategies mentioned, may not be suitable for all investors. You should not take any action with respect to any securities or investment strategy mentioned in this newsletter without first consulting your own Portfolio Manager or in order to ascertain whether the securities or investment strategy mentioned are suitable in your particular circumstances. This information is not a substitute for obtaining professional advice from your Portfolio Manager. The commentary, opinions and conclusions, if any, included in this newsletter represent the personal and subjective view of Daniel Kelly who is not employed as an analyst and do not purport to represent the views of RBC Dominion Securities Inc. The information contained herein has been obtained from sources believed to be reliable at the time obtained but neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers can guarantee its accuracy or completeness. This report is not and under no circumstances is to be construed as an offer to sell or the solicitation of an offer to buy any securities. This report is furnished on the basis and understanding that neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers is to be under any responsibility or liability whatsoever in respect thereof. The inventories of RBC Dominion Securities Inc. may from time to time include securities mentioned herein. Investment Trust Units are sold by RBC Dominion Securities Inc. There may be commissions, trailing commissions, management fees and expenses associated with Investment Trust investments. Please read the prospectus before investing. Investment Trusts are not guaranteed, their values change frequently, and past performance may not be repeated. (Keep reading, there’s only 7 more sentences to go.) This commentary is based on information that is believed to be accurate at the time of writing and is subject to change. All opinions and estimates contained in this report constitute RBC Dominion Securities Inc.’s judgment as of the date of this report, are subject to change without notice and are provided in good faith but without legal responsibility. Interest rates, market conditions and other investment factors are subject to change. Past performance may not be repeated. The information provided is intended only to illustrate certain historical returns and is not intended to reflect future values or returns.RBC Dominion Securities Inc.* and Royal Bank of Canada are separate corporate entities which are affiliated. *Member-Canadian Investor Protection Fund. RBC Dominion Securities Inc. is a member company of RBC Wealth Management, a business segment of Royal Bank of Canada. ®Registered trademarks of Royal Bank of Canada. Used under licence. ©2026 Royal Bank of Canada. All rights reserved.
Investment portfolios are not guaranteed, and past performance is no indication of future returns. In addition to these portfolios not being a guaranteed investment, there can also be significant fluctuations in the value of the portfolio. Has anyone read this far?