Counsellor Quarterly
April 6, 2026
The war in Iran has injected significant uncertainty into the outlook and widened the range of potential outcomes for the economy and financial markets. While risks have intensified, our base case scenario still sees the economy continuing to grow amid a variety of existing tailwinds, allowing stocks to outperform bonds, particularly in non-U.S. regions where valuations are relatively appealing.
New macroeconomic concerns relating to the war in Iran and the downside risks emanating from artificial intelligence (AI) are unlikely to be killer blows: oil prices should drop back in the coming months, and there are positive AI scenarios to weigh against the negative ones. Inflation had been settling down in recent months, reflecting factors including ebbing tariff pressures, easing shelter costs, AI-related deflation and falling oil prices. However, the recent surge in energy costs could cause headline inflation to leap by between 0.5% and 1.5%. This temporary phenomenon should unwind as energy resumes flowing normally through the Strait of Hormuz, the key petroleum chokepoint in the Middle East.
Conflicts, wars and other geo-political conflagrations are not new for investors, but they nonetheless seem to appear on their radar screens quite suddenly when they become a threat to the economy and therefore markets. History has shown that their impact is temporary – so long as they are too – and they are often followed by strong bounce backs. But regardless of the specific economic impacts and the short-term volatility that comes in uncertainty’s wake, history shows that staying true to your long-term plan helps investors to avoid veering off course and making emotionally driven decisions that can hurt their ability to achieve their goals.
Moments like this once again reinforce why investors should always aim to be well-diversified, taking advantage of broad-based exposure to different asset classes, asset types, and even across borders, to manage through the volatility – and, most importantly, to stay resilient.
As always, thank you for your trust in us and for your faith in our capabilities and expertise. We hope that they continue to serve as the deep roots that will keep you steady in stormy times while we await better days ahead.
Sincerely,
Vijay Parmar
President, RBC PH&N Investment Counsel
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