March 2026 Market Commentary

March began with an abrupt geopolitical shock. Early in the month, U.S. military strikes on Iran triggered a temporary shutdown of the Strait of Hormuz, sending an immediate jolt through global energy markets. Oil and refined fuel prices surged sharply as investors priced in supply disruption risk, and risk assets sold off aggressively across global markets. North American equities were not immune. The S&P/TSX Composite declined approximately 4.6 percent over the month, despite a strong late month rally, closing March at 32,768. In the United States, the S&P 500 fell roughly 5.1 percent for the month, ending March at 6,528, as markets digested higher energy prices, elevated uncertainty, and the broader implications for global growth.

From an economic perspective, the energy shock complicated what had otherwise been a fairly constructive macro backdrop. In both Canada and the United States, underlying economic data continued to point to moderating, but still positive, growth. Labour markets showed early signs of cooling, inflation trends outside of energy remained relatively contained, and central banks maintained a cautious, data dependent posture. Markets, however, focused less on backward looking data and more on the immediate inflationary impulse created by higher oil and gasoline prices. Sector performance reflected this dynamic. Energy and materials stocks were notable relative outperformers on the TSX, while interest sensitive areas and growth oriented equities lagged. In the United States, defensive and commodity linked names held up better, while technology and consumer discretionary stocks were among the weaker performers earlier in the month before participating in the late rebound.

Importantly, sentiment shifted as March progressed. Equities rallied sharply into month end amid growing speculation that the Iran situation would be resolved sooner rather than later, easing the risk of a prolonged supply disruption. While conditions may normalize, shocks of this nature tend to leave residual effects. The sudden spike in oil and gas prices represents a temporary, but meaningful, price shock that may keep energy costs somewhat elevated for a period of time. From an investment perspective, volatility of this kind often creates opportunity. During the sell off, we selectively increased exposure to materials, a sector that tends to perform well in late cycle environments and one that aligns with the economic themes we want to participate in as the cycle matures. As always, our focus remains on using periods of dislocation to position portfolios thoughtfully, not reactively, for the long term.

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