Executive Summary

First Quarter

Global equity markets began 2026 on an optimistic footing and remained resilient despite ongoing geopolitical tensions and U.S. tariff policies weighing on investor sentiment. This optimism faded rapidly toward the end of February following targeted attacks in Iran by the United States and Israel, which drove oil prices sharply higher and disrupted supply chains for other key commodities. For the first quarter of the year, the Canadian S&P/TSX index rose 3.1%. Meanwhile, it was a difficult quarter for equity investors in the United States. The Dow Index declined 3.6%, the S&P 500 4.6%, posting their worst quarterly performance in nearly four years, and the Nasdaq index was negative 7.1%. The MSCI World index in US $ was also negative, down 3.9% over the period.

The Bank of Canada (BoC) held rates steady at 2.25%, as widely expected. In the United States, the Federal Reserve also maintained its policy rate, keeping the federal funds rate in a range of 3.50%–3.75%, while noting that the “implications of developments in the Middle East for the U.S. economy remain uncertain.” In both cases, central bankers are faced with the challenging combination of downside risks to growth and upside inflation risks stemming from higher energy prices.

The Model Portfolio increased 1.5% in the first quarter and held up well in the current challenging environment, helped in good part by our energy holdings. We initiated a position in Palo Alto Networks (PANW) to add targeted exposure to the long‑term cybersecurity theme. Amid recent weakness across software companies, PANW shares declined more than 20% and traded at a discount to their peer group, which we viewed as an attractive entry point. As we look ahead, with the Model built to have lower volatility and positioned to achieve strong earnings growth, we believe it should continue to provide positive returns, and a smoother ride for clients along the way.

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Investment Checklist

1. 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.

2. Make 2026 $7,000 TFSA contribution as soon as funds are available. The maximum if you have never contributed is $109,000.

3. Make $2,500 annual RESP contribution per child to benefit from the 30% combined government grants.

4. Take advantage of the new FHSA if you are looking to buy a house for the first time in the future

5. Review asset allocation to make sure it is in line with current objectives and risk tolerance and inform us of any special income need for this year.

The calculation of performance data set forth herein has been prepared by the author as of the date hereof and is subject to change without notice. The author makes every effort to ensure that the contents have been compiled or derived from sources believed to be reliable and contain information and opinions, which are accurate and complete. However, BMO Nesbitt Burns Inc. ("BMO NBI”) makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions which may be contained herein and accepts no liability whatsoever for any loss arising from any use of or reliance on this report or its contents. Information may be available to BMO NBI or its affiliates that is not reflected herein. This report is prepared solely for information purposes. Please note that past performance is not necessarily an indicator of future performance. The indicated rates of return are gross of fees or commissions. Individual results of clients' portfolios may differ from that of the model portfolio as fees may differ, and performance of specific accounts is based on specific account investiture. The noted model portfolio portfolio may not be appropriate for all investors
 

• ¹1 Sources: Bank of Canada, Bloomberg, BMO Capital Markets