Dear Theo,

Summer is finally here, and with it a moment to pause, take stock, and look ahead with some optimism. Yes, it has been a noisy six months: a war in the Middle East, tariff headlines every other week, and a Canada GDP print that technically said recession. And yet markets have shrugged off most of it, with North American equities up solidly on the year. We've said it before and we'll say it again: the news and your portfolio are not the same thing.

As for us, Louis has been out at Knowlton with Irene making the most of the early golf season. The fairways have been taking priority over the canvas lately, though there is something about the light in June that has a way of pulling him back to the easel. As for Theo, he capped off his winter ski season with a redeye weekend in Banff before trading his skis for racquets (plural!). More on that below, as well as the link to the first video in our new series, The Morissette Minute.

We hope you're finding your own moments to enjoy the season, and we look forward to catching up soon.

— Theo & Louis

Economics and Market Updates

The first half of 2026 tested investor resolve on multiple fronts. A Middle East conflict, persistent tariff uncertainty, and a technical recession in Canada all made headlines. And yet North American equity markets finished the period solidly in positive territory — a reminder that portfolios are built to withstand exactly this kind of environment.

Geopolitics

The outbreak of conflict in the Middle East in late February was the dominant market event of the half. Energy was the standout sector: the partial closure of the Strait of Hormuz disrupted roughly 20% of global oil flows, pushing prices higher and lifting energy equities. RBC Capital Markets noted that geopolitical uncertainty of this kind tends to compress price-to-earnings multiples, which explains why the broader market felt more turbulent than the year-to-date return numbers suggest. Bond markets were similarly unsettled, with investors weighing whether elevated energy costs could keep inflation above target. The June MOU between the U.S. and Iran has since improved sentiment on both fronts, though as our feature commentary below notes, important questions remain.

Trade

On the trade front, the picture is more manageable than the headlines have implied. RBC Economics confirms that the vast majority of Canadian exports continue to flow to the U.S. under CUSMA exemption. The July CUSMA review, which has attracted considerable attention, is focused solely on whether to extend the agreement's expiry date from 2026 to 2036. Current tariff rates are not on the table either way.

Feature Commentary: The 2026 U.S.–Iran MOU — What to Keep in Mind

President Trump signed the 14-point MOU with Iran on June 17th, committing to end the war, lift the naval blockade, and restore Strait of Hormuz shipping within 30 days. Oil prices fell roughly 10% on the news. The immediate market reaction makes sense, but Helima Croft, Head of Global Commodity Strategy at RBC Capital Markets, flagged a key uncertainty: toll-free Strait passage is only guaranteed for 60 days.

If Iran charges fees after that window, it "could indeed impede a full normalization of flows," with many Western shippers unwilling to pay. Congressional sanctions oversight and questions around Israel's compliance add further complexity. The ceasefire is a genuine positive, but the hard work of turning a framework into a durable agreement is still ahead.

Canadian Economics: Better than the Headlines

RBC Economics put it well: Canada's economy is "bruised, not broken." The Q1 GDP print (−0.1% annualized, a second straight small decline) grabbed headlines, but the underlying story is more encouraging than it looks. Consumer spending grew 1.5%, per-capita GDP actually rose, and the headline weakness was largely driven by a pullback in federal defence procurement — a one-time drag rather than a sign of broad deterioration.

Here's the interesting wrinkle on the labour market: despite small monthly job losses, the unemployment rate has actually drifted lower — to 6.6% in May — because the labour force itself is shrinking as immigration slows. Households have kept spending, and gas prices, while higher, are still within normal historical ranges as a share of income. The Bank of Canada has held rates steady with core inflation having moved lower. RBC Economics sees 0.6% growth for Canada this year, with the picture improving into 2027.

Staying the Course: What This Means for Your Portfolio

Theo taking a break from his last winter turns at Sunshine Mountain — before a summer pause that ends in August when he goes to Chile!

The first half of 2026 was a useful stress test for well-constructed portfolios. Here is what the data tells us:

Equities are resilient. North American markets are up on the year despite a Middle East conflict, a technical recession print in Canada, and months of tariff noise. Corporate earnings have held up better than expected.

Inflation is not a repeat of 2022. Higher oil prices have nudged headline CPI up, but RBC Economics does not expect a repeat of the 2022 inflation surge. Global supply chains are in better shape, domestic demand has softened, and core inflation pressures have eased considerably. The Bank of Canada is holding rates steady — watching carefully, but not rushing to hike.

Trade risks are manageable. The worst-case tariff scenarios haven't materialized. The July CUSMA review is about extending the deal's timeline, not current rates, and the vast majority of Canadian exports remain exempt.

While Theo was skiing, Louis and Irene were playing their first round of the season at Knowlton!

The through-line of this first half is one we've believed in for a long time: markets are more resilient than the news cycle makes them look.

Please reach out if you'd like to talk through how any of this applies to your portfolio specifically!

Sources: RBC Economics; RBC Capital Markets (Helima Croft, Head of Global Commodity Strategy)

The Morissette Minute: An Introduction

We are excited to introduce The Morissette Minute, a new video series sharing short, practical insights on investing, wealth, and the decisions that shape financial well-being.

Our first instalment, Why Your Brain Works Against You, explores the behavioural traps that quietly erode returns. From loss aversion to recency bias, our minds are wired in ways that can work against us in volatile markets. We walk through the most common cognitive biases investors face — and what to do about them.

Click here to watch!

Off-Piste and Onto the Court and Links

Theo capped off the ski season with a redeye weekend in Banff before trading his skis for serves, getting back on the tennis court after a long hiatus. He also competed in The Big Dill pickleball tournament to fundraise for his alma mater — a "lifer" there from Pre-K to Grade 11!

Theo has known the current Head of School for over twenty years, since he started as a student teacher in elementary school. A true full-circle moment!

Louis has been spending his weekends at Knowlton with Irene, and the golf course has been winning the attention battle over his easel and brush. That said, spring in the Eastern Townships has a way of pulling anyone toward a canvas. More rounds ahead, and probably a painting or two as well!

Joie de Vivre: Summer Sips, Bites, and Culture

To close out this edition, a few picks for the season ahead — from some of our more recent favourite moments with family.

Liquid Assets: Wines of the Season

The Rosé — Bastide de la Ciselette Lou Pigna, Bandol An aromatic rosé that is rich and layered, but remains approachable for both terrace sipping and pairing with seafood or spiced chicken on the BBQ. Available at the SAQ, or look for Hecht & Bannier Bandol Rosé at the LCBO.

The White — Moschofilero Grape Varietal A summer discovery: grown at high altitude in the Peloponnese, this aromatic Greek variety offers rose petal, lemon blossom, and spice. Dry and refreshing — perfect for a glass after a golf game on a hot day. Look for Domaine Tselepos Mantinia at the SAQ or Boutari Moschofilero at the LCBO.

The Red — Dolcetto d'Alba A fan favourite at Theo's last guided tasting. Soft, dry dark cherry and violet with a smooth finish — perfect for summer pastas or red meats on the grill. Serve slightly chilled. We recommend Roberto Voerzio Priavino, available at both the SAQ and LCBO.

Summer Dining

Fat Pasha (Toronto) Vibrant and unassuming Middle Eastern restaurant with a garden-style patio. Bold flavours and sharing plates make it perfect for a big group — make sure to bring your appetite! A favourite of Theo's partner, Lindsey.

Mati (Montreal) A Greek restaurant in the heart of Old Montreal. Their modern take on classic flavours is perfect for discovering your favourite pairing with a glass of Moschofilero, and the cobblestone terrasse is ideal for people-watching and enjoying the warm weather.

Culture Picks

Montreal — Festival International de Jazz (June 25–July 4) A landmark edition this year, with Lionel Richie & Earth, Wind & Fire, Diana Krall, Kamasi Washington, and a J Dilla centenary tribute hosted by DJ Jazzy Jeff. Hundreds of free outdoor concerts across the city.

Toronto — Toronto Outdoor Art Fair (July 10–12, Nathan Phillips Square) 65th anniversary, 400+ artists, free to attend. Pair it with an evening at The Secret Chord: A Leonard Cohen Experience at the CAA Theatre (July 8–August 9) — a stunning tribute to one of Canada's greatest songwriters, just a short walk down King Street.

This information is not investment advice and should be used only in conjunction with a discussion with your RBC Dominion Securities Inc. Investment Advisor. The information contained herein has been obtained from sources believed to be reliable 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. 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. ® / ™ Trademark(s) of Royal Bank of Canada. Used under licence. © 2026 RBC Dominion Securities Inc. All rights reserved.