Strong start to the year across most markets:

• Global equities: +15% (CAD terms)
• U.S. equities: Similar gains, driven by AI spending and rising earnings
• Canadian equities: +11% (Financials, Energy, Industrials led)
• Emerging markets: +28% (Asia strength)
• Bonds: Essentially flat globally; modest gains in Canada

Key Tailwinds for H2 2026:

• Normalized shipping through Strait of Hormuz reducing geopolitical risk
• Lower oil & fuel prices benefiting consumers and inflation outlook
• U.S. AI investment continuing to support economic growth
• Canada: Gradual improvement in growth and labour market expected

Main Risks to Watch:

• Valuation concerns: Markets pricing in optimistic outlook with limited cushion for disappointment
• Earnings/growth shortfalls: Could trigger significant pullbacks
• Trade policy uncertainty: Canadian CUSMA annual review framework creating business uncertainty
• AI profitability questions: Debate continues on whether companies will earn adequate returns on massive AI spending

Our Recommendation:

Despite geopolitical headlines, markets remain resilient. Our constructive outlook for H2 2026 continues, but valuations leave less room for error.

Key takeaway:

Maintain diversified, disciplined investment approach as the foundation for navigating current complexity.

* Historical context: Market reactions to geopolitical shocks tend to be temporary unless they materially impact economic growth or corporate profits.