Q1 2026 Market Review
The first quarter of 2026 has been anything but predictable, with markets shaped more by uncertainty than clarity. Shifting narratives and evolving global dynamics have kept investors on edge and sentiment in constant flux. Rather than moving on clear economic signals, markets have become increasingly reactive to headlines, reinforcing how quickly conditions can change. In this environment, where short-term direction is difficult to anchor, maintaining discipline and staying focused on long-term objectives remains as important as ever.
Trade Policy Developments
On February 20, the U.S. Supreme Court ruled 6–3 that tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were unlawful, determining that the legislation does not grant the president authority to impose tariffs. This decision removed the legal foundation for a significant portion of duties collected since early 2025, with estimates suggesting that between $150 billion and $166 billion may ultimately need to be refunded as companies begin filing claims. Despite the ruling, the administration has moved quickly to preserve its broader trade agenda by shifting to alternative legal mechanisms. These tools allow for the reimplementation of tariffs under different authorities, timelines, and limitations. As a result, while the legal framework has changed, the overall direction of U.S. trade policy remains largely intact, with new tariffs already being introduced in the range of approximately 10–15%.
Interest Rates & Monetary Policy
Monetary policy remained steady throughout the quarter, with no rate cuts from either the Bank of Canada or the Federal Reserve. Canadian inflation eased to 1.8% in February, down from 2.3% in January, while U.S. inflation held steady at 2.4% over the same period. At the same time, leadership uncertainty has added another layer of complexity. On that subject, Federal Reserve Chair Jerome Powell, whose term is set to end in May, has faced increasing political scrutiny from President Donald Trump, including criticism spanning both internal renovation decisions and the Fed’s approach to interest rate policy. Against this backdrop, in early March, former Fed Governor Kevin Warsh was nominated by the President as a potential successor, though the nomination remains stalled in the Senate.
Geopolitics & Commodities
The Strait of Hormuz remains one of the most critical chokepoints in global trade, with roughly one-fifth of the world’s crude oil, around one-third of global fertilizer, and one-third of liquefied natural gas passing through the region. As a result, any conflict that impacts this area can have immediate and far-reaching effects on global supply chains. During the first quarter, rising tensions in the Middle East heightened concerns around potential disruptions to oil and fertilizer flows. When supply is threatened, prices tend to react quickly. Oil prices moved higher as markets began pricing in these risks, which in turn pushed up costs across the economy. Since oil is a key input in transportation and production, higher prices increase the cost of moving and producing goods. At the same time, disruptions to natural gas and fertilizer inputs created additional pressure on agricultural markets, contributing to rising food costs that are often felt most directly by consumers. These inflationary pressures also influence central bank policy. With renewed concerns around inflation, the Federal Reserve has become more cautious about cutting rates, and in some cases. This shift tends to make U.S. Treasury bonds more attractive and can strengthen the U.S. dollar, which competes with traditional safe-haven assets like gold and silver. As a result, precious metals experienced notable volatility during the quarter. Despite ongoing geopolitical uncertainty, gold declined by approximately 22% between March 1 and March 23, while silver fell even more sharply, down roughly 34% over the same period. Toward the end of the quarter, however, crude oil prices began to ease, and both gold and silver started to recover. This suggests that while immediate supply concerns moderated, underlying uncertainty remains. Looking ahead, central bank decisions will likely depend heavily on how these supply-side pressures evolve in the coming months.
Market Performance
As of March 31, 2026, equity markets delivered mixed results. Canadian markets showed modest strength, with the S&P/TSX Composite Index rising 2.77% and the S&P/TSX 60 gaining 1.86%. In contrast, U.S. markets declined, with the S&P 500 down 4.81%, the Dow Jones Industrial Average falling 4.22%, and the NASDAQ leading losses with a 7.08% decline.
Sector performance reflected the quarter’s key themes. Energy was the standout performer, rising approximately 38.38% amid higher oil prices, while more economically sensitive sectors struggled. Consumer cyclical stocks declined 14.69% as spending softened, and financials fell 11.72%, weighed down in part by concerns surrounding private credit and liquidity conditions.
Periods like this reinforce the importance of staying grounded in a disciplined, long-term approach. Market uncertainty can be discouraging, but it is a natural part of investing and often highlights the value of diversification. As we’ve seen this quarter, different regions and industries can be impacted in very different ways, particularly when global events affect key areas such as energy and trade. Having a well-diversified portfolio helps manage these risks while positioning for opportunities that can arise across markets. Our focus remains on guiding your portfolio with consistency and care, making measured adjustments where needed while keeping your long-term objectives at the forefront. If you have any questions about your investments or would like to discuss anything further, we are always here to help.
Written By: David Renaud
Sources
- AAA fuel prices. (n.d.). https://gasprices.aaa.com/news/
- Bank of Canada. (n.d.). Consumer price index. https://www.bankofcanada.ca/rates/price-indexes/cpi/
- Hormuz shipping disruptions raise risks for energy, fertilizers and vulnerable economies. (2026, March 10). UN Trade and Development (UNCTAD). https://unctad.org/news/hormuz-shipping-disruptions-raise-risks-energy-fertilizers-and-vulnerable-economies
- L, P. (2026, March 31). Here’s the best-performing stock sector in Q1 2026. Finbold. https://finbold.com/heres-the-best-performing-stock-sector-in-q1-2026/
- LEARNING RESOURCES, INC., ET AL. v. TRUMP, PRESIDENT OF THE UNITED STATES, ET AL. (2026). Supreme Court of the United States. https://www.supremecourt.gov/opinions/25pdf/24-1287_4gcj.pdf
- Tariffs put businesses in crisis. waiting for the refund could be worse. (2026, March 30). The Wall Street Journal. https://www.wsj.com/business/tariffs-put-businesses-in-crisis-waiting-for-the-refund-could-be-worse-473d9387
- TRADING ECONOMICS. (n.d.). United States inflation rate. https://tradingeconomics.com/united-states/inflation-cpi
- U.S. Supreme Court Strikes Down Certain Tariffs, Raising New Uncertainty for Canada–U.S. Trade | Blakes. (2026, March 31). https://www.blakes.com/insights/u-s-supreme-court-strikes-down-certain-tariffs-raising-new-uncertainty-for-canada-u-s-trade
Posted in The Francis Forum
