In the first half of 2026, global stock markets delivered double-digit returns despite heightened geopolitical tensions and uncertainty surrounding global trade.[1] Conflict spread across the Middle East, leading to a blockade of the Strait of Hormuz, which pushed energy prices higher and reignited inflation concerns. Another key development was the US administration’s announcement that it would decline the automatic extension of the Canada–United States–Mexico Agreement (CUSMA), triggering a decade of annual reviews to renegotiate the deal before its current expiration date in 2036.

Economic growth remained subdued in North America. In Canada, GDP was flat in the first quarter, following a 0.2% decline in the fourth quarter of 2025, prompting debate over whether the economy had entered a recession. In the US, economic growth was somewhat stronger, with GDP increasing 2.1% in the first quarter following a modest 0.5% expansion in the previous quarter.

Inflation accelerated in North America. Canadian inflation rose from below 2.0% earlier this year to 3.2% in May, largely reflecting higher gasoline prices. In the US, headline inflation reached 4.1% in May, while core inflation (excluding food and energy) stood at 2.9%, well above the Federal Reserve’s 2.0% target. Labour markets remained relatively stable, with unemployment at 6.6% in Canada and 4.1% in the US.

Central bank policy rates were unchanged over the period, remaining at 2.25% in Canada and 3.50% in the US. Longer-term interest rates moved modestly higher, with 10-year government bond yields rising from 3.24% to 3.38% in Canada and from 4.18% to 4.41% in the US.

Global stock markets delivered strong, broad-based returns. Nine of the eleven global equity sectors generated positive returns, led by information technology (34.4%), energy (20.7%), and industrials (19.7%). Among major markets, South Korea (112.0%), Taiwan (67.7%), and the Netherlands (43.6%) posted the strongest returns.

Asset-class performance during the first half of 2026 was as follows:

Short-term and broad Canadian fixed-income indices returned 1.5% and 2.2%, respectively.
Short-term and broad global fixed-income indices (hedged to the Canadian dollar) each returned 0.3%.
Canadian equities returned 11.1%.
US equities gained 14.8% in Canadian dollars and 10.9% in US dollars.
International developed-market equities returned 13.2% in Canadian dollars and 11.7% in local currencies.
Emerging-market equities returned 28.4% in Canadian dollars.
In the US, small-cap stocks outperformed large-cap stocks. In contrast, large-cap stocks outperformed in international developed and emerging markets, while Canadian large- and small-cap stocks produced similar returns.
Value stocks outperformed growth stocks in Canada, the US, and international developed markets. In emerging markets, value and growth stocks performed similarly.
Most major currencies appreciated against the Canadian dollar, boosting the Canadian-dollar return on US stocks by 4% and international developed-market equities by roughly 1.5%.

Global equity markets have now produced double-digit returns in seven of the past nine years, and 2026 is on track to continue that pattern. Such returns are exceptional by historical standards, and long-term investors should not expect them to persist indefinitely. Periods of negative returns are inevitable—we simply cannot predict when they will occur. That is why PWL builds resilient portfolios designed to capture long-term market returns while withstanding periods of market stress. We remain committed to our long-term investment philosophy, emphasizing global diversification, low costs, and tax-efficient portfolio management.

[1] Sources: DFA, Bank of Canada, Statistics Canada, US Federal Reserve, US Bureau of Labor, US Department of Commerce, Eurostat, Trading Economics.