Market and economic commentary
March 2026

Global markets in flux

When it rains, it pours! Investors jumped quickly from one extreme—the “SaaS Apocalypse”—to the next—the Gulf Conflict—without missing a beat. Every major market index closed the month in the red, with the Compass Portfolios and all ATBIS Pools (the Funds)¹ following suit. Up-to-date performance data for the Funds can be found here.

A month in review

Below are index one-month total returns in Canadian dollar (CAD) terms for March 31, 2026:

A logistics crisis, not a resource one

Before the tech heavyweights even had a chance to recover from their worst quarter since the dot-com crisis, the Gulf Conflict was foisted upon the global market. Overnight, investors shelved their discounted cash-flow models to brush up on geography, trying to understand why a 35 kilometre-wide body of water—the Strait of Hormuz—is garnering more eyeballs than the Superbowl. Currently, the world is focused on one metric: how many ships are passing through this “two-lane passageway” each day. 

Is this obsession justified? How long will it persist? These questions dominate investor sentiment today. Certain parts of the market have already seen significant dislocation, but let’s unravel the pieces of this mosaic to understand the potential opportunities ahead. 

We are witnessing an oil shock in real time, but the context has changed since the 1980s and 1990s. While oil demand has steadily risen, so has supply. Extraction technology has improved considerably and we have found ways to extract more value out of that same unit of oil—we can do more with less. Strictly speaking, there is no global oil shortage today. 

The blockade in the Strait of Hormuz represents a fracture in a well-oiled supply chain. Economies heavily dependent on the Strait—specifically China, India, and Japan—must now find alternate supply partners. Canada, despite its vast reserves, stands ready to assist and has its proverbial hand up—sadly no takers yet. The challenge today is logistical: rerouting oil from extraction points to end markets. 

As we learned from the pandemic, global supply chains don’t reroute overnight. Five weeks into the conflict, impacted nations are still sitting on months of oil reserves; there is little evidence yet of meaningful progress made on finding alternative supply chains. Many appear to be betting that the Strait would reopen soon and normalcy will return. To the casual observer, this feels akin to refusing to open the Lyft app while waiting for an Uber in the rain. Until this is resolved, the price of oil will likely trade at elevated levels—WTI traded at $111 as of April 5—to reflect a “surge pricing” environment. As with previous “surge pricing” moments, we expect this too shall pass, as the current administration has historically shown limited appetite for prolonged conflict. 

The inflationary side effect

In the meantime, rising energy costs are feeding into broader inflationary pressures, which has effectively “neutered” the central bank toolkit. Policy makers who were poised to cut rates are now on hiatus (US Federal Reserve) or are even considering hikes (i.e. Canada) later this year. We expect some of this bearish sentiment to dissipate once the passageway is restored. 

Notably, the global growth backdrop remains positive. Job data and profit margins remain robust heading into the reporting season. Furthermore, the conflict coincides with the US tax refund season. This “stealth stimulus” acts as a shock absorber, helping consumers offset higher prices as the pump. The subtle change at the margin is that the stimulus, previously expected to accelerate growth in 2026, is now being viewed as a buffer for the ongoing conflict. 

Bonds, equities and earnings growth

Despite the headlines, geopolitical activity has done little to dampen earnings expectations. Growth remains on a double-digit trajectory in both the US and Emerging Markets (EM) as we head into Q1 reporting season. Recent price action has pushed the S&P 500’s 12-month forward price-to-earnings ratio below 20x. In the EM space, where valuations were already modest, the earnings boost makes the market even more attractive. For value-oriented investors, the recent volatility has opened up a rare trading opportunity. 

Finally, March provided a stark reminder that the textbook relationship between bonds and equities may be due for a revision. Bonds fell alongside equities as long-term rates rose with inflation. With central banks on the sidelines, duration has become a liability. In a macro environment riddled with inflationary friction, bonds cannot always be relied upon to offset equity risk. 

Compass Portfolios Series F1 - Returns net of fees (%)

ATBIS Pools Series F1 - Returns net of fees (%)

¹ Using F series returns