Market View
Quarter 2, 2026
From Conflict to Calm: Markets Find Their Footing
“After a storm comes a calm.” The 17th-century writer Matthew Henry meant it as an observation about human affairs, but it could just as easily describe the second quarter of 2026. The conflict that rattled oil markets and unsettled investors early in the year gave way to an uneasy calm.
Executive Summary
The second quarter of 2026 saw markets stabilize as tensions in the Middle East eased, the Strait of Hormuz reopened, and oil and gold prices moderated. Renewed geopolitical concerns and a cautious Federal Reserve brought some volatility back in June, though conditions stayed calmer than earlier in the year. Through it all, our approach remained unchanged: high-quality businesses, diversification, and your long-term goals.
Policy Backdrop in Ottawa: The CUSMA Review
Trade tensions highlighted in Prime Minister Mark Carney’s Davos speech moved into a more formal phase this quarter. Canada established an advisory committee to guide CUSMA discussions with the United States and Mexico, pressed for relief from U.S. tariffs on steel, aluminum, lumber and autos, and in June formally sought an early renewal ahead of the July 1 review. Just after quarter-end, the United States declined to renew the agreement in its current form. CUSMA remains in force but now moves to annual reviews through 2036, with existing tariffs still in place, so the relationship will be revisited each year while Canada continues pursuing broader trade diversification.
Bank of Canada: Holding Steady
The Bank of Canada held its policy rate at 2.25% in June, balancing persistent inflation against a slowing economy. Inflation rose to 2.8% in April, though underlying measures stayed close to the Bank’s 2% target, and growth showed signs of improvement as GDP rebounded in April with modest gains expected in May. With inflation risks lingering but growth stabilizing, the Bank signalled it remains ready to adjust policy as conditions evolve.
The Canadian Dollar
The Canadian dollar weakened as oil prices declined and trade uncertainty persisted, easing from about US$0.73 in April to near US$0.71 by the end of June. It remains sensitive to both energy prices and developments in Canada-U.S. trade relations.
What Changed Globally: Tensions Ease, Uncertainty Lingers
The quarter saw a shift from conflict toward a fragile calm. As Anish Chopra, Managing Director at Portfolio Management Corp., told The Canadian Press on April 17, 2026, the reopening gave the market room to steady:
“The ceasefire, the impact on the price of oil is just giving legs to certain sectors like consumer cyclicals and the broader market.”
The calm did not last. Renewed geopolitical concerns and a cautious Federal Reserve brought volatility back in June. Anish, speaking to The Canadian Press on June 3, 2026, called it a “tug of war” between geopolitics and AI, as the Fed held rates steady while signalling, they might stay higher for longer than hoped. By quarter-end, Anish described the market’s view of the Middle East, in comments to The Canadian Press on June 17, 2026, as “less of an immediate supply shock and more of a fragile de-escalation story.” In short, the calm rests on tensions easing rather than truly ending, worth keeping in mind for the second half of the year.
Away from geopolitics, artificial intelligence remained the market’s most powerful theme. We regard AI as a genuine and lasting shift and follow it closely, while keeping our focus where it has always been: durable, high-quality businesses at sensible valuations, with your long-term goals firmly in mind.
What This Means for You
Tensions have eased but not vanished, and interest rates are likely to bring some ups and downs ahead. Quality, diversification, and discipline remain our guiding principles.
- Own high-quality companies with strong finances and steady profits that can weather what comes.
- Stay diversified across industries and countries, rather than leaning on any one theme.
- Watch oil prices and the trade talks, and how they feed into inflation, rates and the dollar.
- Keep some cash ready, so we can act on opportunities when markets get bumpy.
We will keep watching the risks and opportunities and adjust carefully with your long-term goals front and centre.
Client Question Corner
With proper planning, a Registered Education Savings Plan (RESP) can fund many education-related expenses while maximizing available tax benefits.
| Question | Answer |
|---|---|
| What can the funds be used for? | Tuition, books, residence, rent, transportation, and other education-related expenses. |
| When can I start withdrawing? | Once the registered beneficiary is enrolled in a qualifying post-secondary program and proof of enrollment has been provided. |
| What are the tax benefits? | The beneficiaries report withdrawals as income for tax purposes. They pay little or no tax because they often have a low income and may have tuition credits available. |
| How are withdrawals taxed? | The original contributions can be withdrawn tax-free. The grant and growth portion of the plan is taxable to the beneficiary. |