Executive Summary

Third Quarter

Developed equity markets were relatively quiet over the quarter. The S&P/TSX Canadian index gained 1.1%, trailing the S&P 500 benchmark (up 2.0%) and the Nasdaq (up 2.5%). Year to date, the S&P/TSX (+11.1%), S&P 500 (+11.8%) and Nasdaq (+15.6%) all remain firmly in double-digit territory, while the Dow is up a more modest 5.9%. Commodity and fixed income markets saw a more eventful quarter. The conflict between the U.S. and Iran entered its eighth month, and disruptions in the Strait of Hormuz drove crude oil prices up more than 30% in both Europe and North America.

The Bank of Canada (BoC) held its policy rate at 2.25% for a seventh consecutive meeting, as widely expected. In the United States, the Federal Reserve unanimously raised the federal funds target range to 3.75% to 4.00%, its first increase since 2023.

The oil shock revived inflation worries, driving developed market interest rates sharply higher and prompting the Federal Reserve to raise rates in the third quarter. Despite this unexpected shift, equity markets absorbed the setbacks and continued to advance on very strong earnings growth fueled by the AI revolution. As we close out 2026 and head into 2027, we believe inflation and the AI revolution are two key areas for investors to watch.

The Model Portfolio continues to perform well in 2026 on both an absolute and relative basis. It increased 1.4% in the third quarter and it is up 10.9% year to date. While the portfolio will not be immune to broader market declines if sentiment changes, we believe it holds a diversified group of businesses that can generate earnings growth over a full cycle without relying on the theme that continues to dominate headlines. Managing the model portfolio this way has allowed us to preserve capital during periods of instability while still delivering strong long-term returns. Within the Model Portfolio, we sold our positions in Telus and Onex during the quarter. We used the proceeds from both sales to initiate a position in WSP Global (see profile on page 19), BMO Capital Markets' top pick in the Industrial Products sector. While the stock has pulled back over the past year on fears that AI will disrupt the traditional engineering consulting model, WSP's fundamentals continue to strengthen. In the fixed income portfolio, we invested $700,000 of accumulated cash in a mix of bonds and GICs.

With more capital gains triggered than usual so far in 2026, as the year end approaches, we are using the opportunity to also review client’s individual situation, needs and tax planning.

 

Personal Checklist

  • Make 2026 RRSP contribution as soon as funds are available. The maximum is 18% of 2025’s earned income to a maximum of $33,810.
  • Make 2026 $7,000 TFSA contribution as soon as funds are available. The maximum if you have never contributed is $109,000.
  • Make $2,500 annual RESP contribution per child to benefit from the 30% combined government grants.
  • Take advantage of the new FHSA if you are looking to buy a house for the first time in the future