GWM Team
March 4, 2026
Monthly Report: March 2026
A few topics our newsletter touches on this month:
- Our Thoughts: A Volatile Spring
- By the numbers: February
- Other Things: Disruptors podcast, Global Insight Monthly, Arts in Ottawa corner
Our Thoughts: A Volatile Spring
Canadian and international equity markets continued their strong run in February, on the back of solid earnings and global trade (in particular tariff-related) developments. We expand on that a bit more below but first topic is last weekend’s U.S. and Israel-led attacks on Iran which has destabilized the region and contributed to elevated market volatility since. The recent market pullback is connected to related concerns about higher oil prices as well as disappointing jobs data out of the U.S.
Eyes on Iran
Recent Middle East escalation has lifted geopolitical risk, driving near-term volatility, softer risk appetite, and rotation toward safe havens. Markets are watching energy supply/transport disruption—especially key shipping chokepoints like the Strait of Hormuz —as the main channel to inflation and growth expectations. Base case is a temporary risk premium that fades with containment; a prolonged conflict could keep energy higher and raise stagflation risks, particularly for energy‑importing economies.
U.S. equities may be better positioned to weather a storm than global peers: net energy exporter status, reduced overseas revenue dependency, and relative valuation cushions provide some insulation. Meanwhile, U.S. dollar strength from risk-off flows could deliver an often-overlooked boost to relative U.S. equity returns.
Solid Corporate Earnings
As the Q4 2025 earnings season for the S&P 500 draws to a close, the index has achieved its fifth consecutive quarter of double-digit earnings growth. However, the “beat rate”—the share of companies exceeding profit expectations—moderated. In an environment where valuations remain elevated, a narrower gap between reported results and forecasts could leave markets somewhat more sensitive to disappointments or adverse macro shocks. The market continues to experience a shift from the high technology ‘growth’ sectors to the value-oriented cyclical groups such as banks, resources, and industrials.
Earnings results from some Big Tech firms were closely watched as a test of whether heightened AI-linked expectations can be maintained. Investors are increasingly looking for clear evidence that substantial AI investments are translating into tangible returns, amid questions around profit growth visibility and the potential for AI-driven disruption in certain industries. This skepticism was evident when a major AI infrastructure firm recently delivered a “beat and raise”—exceeding revenue forecasts and lifting forward guidance—was met with a subdued market response. Nevertheless, the Big Tech group, broadly speaking, remain supported by durable business models and reliable cash flow generation.
North of the border, Canadian firms are also wrapping up their 2025 reporting season, while major banks reported Q1 2026 results. Bank earnings have been positive, with record profits driven by solid performance across key divisions alongside improved return on equity (ROE). Despite trade and geopolitical uncertainty, consensus estimates for the S&P/TSX Composite Index continue to point toward double-digit earnings growth this year, underpinning a constructive outlook for Canadian equities.
More Tariff Developments
The U.S. Supreme Court struck down some tariffs imposed by the Trump administration under the International Emergency Economic Powers Act (IEEPA) last week. The market reaction was largely muted as investors had anticipated both the ruling and efforts by the administration to reinstate tariffs through alternative legislations.
Accordingly, a 10% global tariff on U.S. imports came into effect earlier this week, with the White House indicating that could increase to 15% "where appropriate". Implemented under Section 122, these levies can remain in place for 150 days without Congressional approval. Given the current composition of Congress, a vote to extend the tariffs appears unlikely, but the temporary measure provides time for the administration to restructure its tariff policy and prepare for further legal challenges.
For Canada, the immediate economic impact remains limited. Roughly 90% of Canadian exports to the U.S. continue to flow tariff-free under exemptions within the U.S.-Mexico-Canada Agreement (USMCA). Meanwhile, sectoral tariffs on metals, autos, and other targeted parts of the Canadian economy imposed under Section 232 remain in effect and continue to weigh heavily on certain industries.
Our base case remains that the core agreement framework stays intact, given deeply integrated North American supply chains and the shared economic costs of disruption. That said, we expect negotiations to involve political signaling and sector-specific pressure points that could stoke near-term uncertainty. We are monitoring developments on this front closely.
Takeaway
While markets remain susceptible to shifts in sentiment given elevated valuations and policy uncertainty, strong corporate earnings momentum provides grounds for measured optimism. Trade uncertainty continues to influence business and consumer confidence, but equity markets are primarily driven by earnings over time. Against a backdrop of steady economic fundamentals, we believe maintaining a cautiously constructive stance in portfolios remains sensible.
By the numbers (Feb):
The TSX was up 7.7% while the S&P 500 was down 0.8% in U.S. dollars (down 0.6% in $CAD). Reflecting AI uncertainty, the tech-heavy NASDAQ was down 3.2%. The Europe, Australia & Far East index (EAFE) was up 5.4%, while the Emerging Markets index was up 6.3%. The Canadian bond market was up 1.7%.
Interesting Listening/Reading:
- Disruptors - A dynamic <30 min RBC podcast hosted by John Stackhouse about reimagining Canada’s economy in a time of unprecedented change.
- To check out our Global Insight Monthly for March find the link here.
“Arts in Ottawa” Corner: IFFO 2026
The National Capital Region has several film festivals that happen every year, with different mandates and types of film. We have been a proud sponsor for the last few years of the Ottawa Canadian Film Festival (OCAN) and if you enjoyed that experience and are looking for more – this month the International Film Festival of Ottawa (IFFO) has screenings happening across the city.
Regards,
Mark, Peter, Sarah, Corinne & Nathalie
Gallivan Wealth Management of RBC Dominion Securities