Key Takeaways March 2026
Volatility Returns
March reinforced the market shift we discussed last month toward greater selectivity, but added a new variable as geopolitical tensions escalated following Operation Epic Fury.
This triggered a spike in oil prices, a shift lower in interest rate expectations, and a short-term increase in market volatility.
Markets pulled back as investors questioned whether this was the start of a broader sell-off or simply temporary volatility.
Refinement, Not Reversal
Markets are experiencing higher intraday volatility driven by geopolitical headlines.
However, when looking at individual companies, leadership remains narrow, valuations are adjusting, and earnings discipline remains central.
The core themes remain intact:
• Selectivity has increased
• Headlines are driving short-term swings
• The gap between growth and defensive valuations continues to shift
Markets are simply reacting more quickly to new information.
Year-to-Date Snapshot (March 4, 2026)
Despite geopolitical headlines and higher oil prices, broader markets have held up relatively well so far this year.
• TSX Composite: +7% year-to-date
• Dow Jones: +1.3% year-to-date
• S&P 500: flat year-to-date
• Nasdaq: -1.8% year-to-date
Leadership remains narrow rather than broadening across the market.
AI: From Theme to Execution
The AI investment cycle remains intact, supported by strong earnings growth and elevated capital investment by major technology companies.
However, markets are increasingly distinguishing between:
• Companies monetizing AI today
• Companies still heavily investing for future returns
Returns are now being driven by earnings quality and balance sheet strength rather than narrative enthusiasm.
Software Repricing & Competitive Pressure
The software sector has experienced a repricing due to:
• AI-driven competitive pressure
• Increased public data accessibility
• Margin sensitivity
Diversified platforms with broad ecosystems have shown resilience, while more specialized providers have faced greater pressure.
Selectivity within the sector is becoming increasingly important.
Technical Backdrop: Opportunity in Dislocation
Several large-cap technology companies recently tested or moved below long-term moving averages.
Historically, similar dislocations in structurally strong companies have created buying opportunities when earnings fundamentals remain intact.
Policy Uncertainty & Market Volatility
Policy developments have also contributed to recent volatility.
Most notably, U.S. courts recently struck down portions of the administration’s proposed global tariff program, creating renewed uncertainty around trade policy.
Markets are increasingly reacting to policy developments and legal challenges even when underlying economic fundamentals remain stable.
Inflation: Narrowing, But Not Gone
Inflation continues to moderate but remains above central bank targets.
Services inflation remains persistent in the United States, while housing costs continue to drive inflation pressure in Canada.
February CPI data, released in March, is expected to show further moderation, although higher energy prices could place temporary pressure on March inflation data.
Inflation Outlook
The broader disinflation trend remains intact, but inflation is likely to remain uneven month-to-month, particularly given geopolitical pressures on energy prices.
The Federal Reserve and Bank of Canada are therefore likely to remain cautious, with policy decisions continuing to depend heavily on incoming data.
Portfolio Positioning
Our positioning remains consistent:
- Equities: Fully invested but selective, emphasizing quality growth and durable cash flow
- Fixed Income: Focused on high-quality income while maintaining discipline around credit risk
We continue to participate in markets without chasing crowded trades.
What We Are Watching
Our focus remains on several key developments:
- Relative valuations between growth and defensive companies
- Earnings execution within AI-exposed sectors
- Policy developments and tariff clarity
- The evolving situation involving Iran and its impact on energy markets and risk sentiment
- Persistent inflation components
- Market breadth and leadership durability
Our approach remains proactive rather than reactive to short-term market noise.
Summary
Our outlook shared in February remains largely intact, while we remain mindful of evolving geopolitical risks.
Key themes remain:
- The AI investment cycle remains intact
- Relative valuations are shifting toward selective growth
- Inflation is moderating but still relevant
- Policy uncertainty is contributing to volatility
- Market leadership is becoming more concentrated
In this environment, markets continue to reward quality, strong balance sheets, and disciplined portfolio construction.