March 2026

The Middle East conflict that erupted at the end of February saw an immediate reaction from asset prices in March. Oil prices climbed, the dollar rallied, and yields softened. Gold bounced, up almost 5% across the first two trading sessions. Historically gold has responded positively when oil prices rise in response to a demand surge but fall in the short run, in response to a supply removal shock. Gold is being sold because liquidity is being raised, not because its role as a strategic asset has diminished. In March we maintained our twelve-month forward outlook of three months of Stagnation (U.S. Real GDP growth less than 2.5%) followed by nine months of Recession (negative GDP growth) over the next twelve- month period.

China’s annual inflation jumped to 1.3% in February from 0.2% in January,¹ while China’s surveyed urban unemployment rate rose to 5.3%.² China’s trade surplus stood at USD 213.62 billion in the first two months of 2026.³ The Euro Area economy grew by 0.2% in Q4 2025, down from 0.3% in Q3, highlighting modest momentum despite easing inflation, lower interest rates, and resilience amid headwinds from U.S. trade tariffs on E.U. imports. Among major economies, Spain led with 0.8% growth, driven by strong household consumption and investment, followed by the Netherlands at 0.5%. Germany and Italy each grew 0.3%.⁴ The annual core inflation rate in the Euro Area was confirmed at 2.4% in February.⁵

The U.S. economy expanded an annualized 0.7% in Q4 2025.⁶ The annual inflation rate in the U.S. held steady at 2.4% in February, while unemployment rose to 4.4%.⁷ The U.S. trade deficit narrowed sharply to $54.5 billion in January 2026. Exports jumped 5.5% to a record high of $302.1 billion led by sales of nonmonetary gold. Imports declined 0.7% to $356.6 billion. The largest trade gaps were recorded with Vietnam, Taiwan, Mexico, and China.⁸ The headline inflation rate in Canada fell to 1.8% in February from 2.3% in the previous month,⁹ while the unemployment rate rose to 6.7% from 6.5% in the previous month.¹⁰ Canada’s trade deficit widened to C$3.6 billion in January 2026 from a C$1.3 billion deficit in December. Exports fell 4.7% month over month to C$62.48 billion, with motor vehicle and parts exports down 21.2% as production stoppages affected passenger car shipments. These declines were partly offset by a 4.1% increase in energy product exports, driven by natural gas. Canada’s surplus with the U.S. narrowed to C$5.4 billion, while the deficit with countries other than the U.S. widened to C$9.0 billion.¹¹ 

February was a challenging month for U.S. equities as growing scrutiny of AI-related capital expenditures and their associated impact on business models took a toll on large-caps, with the S&P 500 closing down 0.8% for the month. Market leadership shifted toward smaller companies, with the S&P Mid Cap 400 and the S&P Small Cap 600 up 4.1% and 2.2% respectively. Major Canadian equity indices finished the month with positive results. The S&P/TSX Composite increased 7.7%. Canadian sectors posted mixed performance for the month, with the S&P/TSX Global Gold Index climbed 23.6%. The S&P Europe 350 had its second consecutive month of strong gains, rising 3.9% in February. Asia Pacific equities extended their positive momentum and outperformed global peers in February, with the S&P Pan Asia BMI rising 6.8% to an all-time high.

In March we maintained exposure to U.S. and Canadian Equities. We continue to believe that Canada is managing the U.S. tariff uncertainty relatively well, replacing some U.S. exports with contracts in Europe and abroad. Gold is held across all models as a long-term strategic asset, playing a role as an effective hedge against the heightened geopolitical uncertainty and market volatility. Gold has historically been negatively correlated with the dollar. Gold has become more tightly linked to reserve accumulation by central banks, sovereigns and sovereign wealth funds than to traditional portfolio flows. The major sell-off over the last three week occurred against a backdrop that, under traditional frameworks, should have been supportive: elevated geopolitical risk, a major energy shock, rising volatility across asset classes, and growing concerns about global growth. Gold’s decline was triggered by liquidity-driven deleveraging, not by a change in fundamentals.

The global system is moving deeper into a regime defined by energy scarcity, fiscal strain, and elevated inflation risk. Debt levels are high; deficits are widening and central banks face increasingly constrained policy choices. If the energy shock persists and growth deteriorates, the probability of renewed large-scale liquidity support (QE or quantitative easing) rises materially.  For the U.S. economy, stagflation risk is higher because of limited policy flexibility from the Federal Reserve. Our approach to portfolio management is nimble, opportunistic, and deliberate in identifying asset classes that are best placed to generate returns in a new world order. Our focus is on protecting portfolios from downside risk, and we believe that our investment process is working to achieve that goal.

Deborah Frame, President and CIO

Drew Millard, Portfolio Manager

¹ Trading Economics. China Inflation. March 9, 2026.

² Trading Economics. China Unemployment. March 16, 2026.

³ Trading Economics. China Trade. March 10, 2026.

⁴ Trading Economics. EU GDP. March 6, 2026.

⁵ Trading Economics. EU Inflation. March 18, 2026.

⁶ Trading Economics. U.S. GDP. March 13, 2026.

⁷ Trading Economics. U.S. Inflation. March 6, 2026.

⁸ Trading Economics. U.S. Trade. March 12, 2026.

⁹ Trading Economics. Canada Inflation. March 16, 2026.

¹⁰ Trading Economics. Canada Unemployment. March 13, 2026.

¹¹ Trading Economics. Canada Trade. March 12, 2026.

Index return data from Bloomberg and S&P Dow Jones Indices Index Dashboard: U.S., Canada, Europe, Asia, Fixed Income. February 28, 2026. Index performance is based on total returns and expressed in the local currency of the index.