Here we go again. A year ago, the global economic system was challenged by a shift away from open trade toward protectionism built on tariffs. Now, a match has been lit in the combustible Middle East, presenting another test. Market volatility in the first quarter mirrored last year’s, and to start the second quarter investors are again tempted by the “TACO trade” (Trump Always Chickens Out). With tariffs, an executive order was enough to spark a rally; this time, putting the genie back in the bottle may not be so easy.
The fallout from the attacks on Iran has been multifaceted. The most immediate impact is oil—both the price spike and the added risk premium as markets price in potential supply disruptions. Against that backdrop, the Canadian market looks comparatively attractive, supported by institutional stability. Energy stocks enjoyed their best quarter in years, and more defensive areas of the market also held up well, with consumer staples and telecom stocks outperforming.
By contrast, stocks that had been in favour since Trump’s “liberation day”, sold off. Technology shares were among the hardest hit—not because the region is central to their revenues or because they rely on cheap oil, but because investors tend to punish long-duration assets when uncertainty rises. When expected cash flows are farthest out, investors favour reliability over long-term bets. Today’s massive technology capital expenditure reflects a major shift that may take years to translate into durable profits.
The Iran crisis, of course, wasn’t the only driver of markets in the first quarter. On the technology and Artificial Intelligence (AI) front, fears of a “software apocalypse” resurfaced—the idea that AI agents could be built to replicate what traditional software does today. “Software as a Service” (SaaS) companies were hit hardest; Adobe, Salesforce, and Workday, for example, were in the crosshairs, with their stocks falling 20%–30% in Q1. Closer to home, Shopify fell more than 30% for similar reasons.
This highlights the inherent risks of technology investing in our current cycle. Disruption can emerge at any time, and buying high-valuation stocks in the hope of profits five or more years out can entail more risk than it appears. The AI threat may be overstated for some of these companies, but that alone may not prevent valuations from compressing as investors seek certainty in an uncertain environment.
Overall, our portfolios have held up well despite volatility and emerging risks. The global economy is slowing, but domestic employment remains solid—for now. A prolonged crisis in the Middle East could shift inflation from temporary to structural as companies pass through higher transportation and manufacturing costs. That could lead to higher interest rates, pressuring consumer, corporate, and government budgets and ultimately the economy. It will also create more pressure in private credit, a sector that has come under considerable pressure recently as investors realize those consistent returns may have been helped by lower rates and investor appetites. As investors begin to withdraw, valuations and liquidity are being tested.
If you feel more concerned after reading this letter, we understand—and we apologize. This is the reality of a highly unpredictable environment. That said, history has taught us the folly of trying to time markets or overreact to short-term events. We only need to look back at the last few years and the experience with tariffs and Covid to remember that the tide can shift quickly in both directions.
From our perspective rest assured we are not complacent in the face of these risks. We are allowing dividends to accumulate as we wait for more attractive entry points in select companies. We are also scrutinizing our holdings closely and, when warranted, trimming or exiting positions. Markets will fluctuate; the long-term value of quality businesses, far less so. As always, we remain focused not on predicting the next quarter, but on owning assets that will be worth more, in real terms, over time.
We wish you the best as we head into spring and welcome any comments or questions you may have.
This commentary is for general information only, based on information available as of March 31, 2026, and does not constitute investment advice, an offer, or a recommendation. Market conditions may change and Doherty & Associates Ltd. assumes no responsibility for decisions made in reliance on this information; investors should consult their Portfolio Manager before investing. References to specific securities are illustrative only and performance is not guaranteed. This document may contain forward-looking information subject to risks and uncertainties. Information as of March 31, 2026.
The fallout from the attacks on Iran has been multifaceted. The most immediate impact is oil—both the price spike and the added risk premium as markets price in potential supply disruptions. Against that backdrop, the Canadian market looks comparatively attractive, supported by institutional stability. Energy stocks enjoyed their best quarter in years, and more defensive areas of the market also held up well, with consumer staples and telecom stocks outperforming.
By contrast, stocks that had been in favour since Trump’s “liberation day”, sold off. Technology shares were among the hardest hit—not because the region is central to their revenues or because they rely on cheap oil, but because investors tend to punish long-duration assets when uncertainty rises. When expected cash flows are farthest out, investors favour reliability over long-term bets. Today’s massive technology capital expenditure reflects a major shift that may take years to translate into durable profits.
The Iran crisis, of course, wasn’t the only driver of markets in the first quarter. On the technology and Artificial Intelligence (AI) front, fears of a “software apocalypse” resurfaced—the idea that AI agents could be built to replicate what traditional software does today. “Software as a Service” (SaaS) companies were hit hardest; Adobe, Salesforce, and Workday, for example, were in the crosshairs, with their stocks falling 20%–30% in Q1. Closer to home, Shopify fell more than 30% for similar reasons.
This highlights the inherent risks of technology investing in our current cycle. Disruption can emerge at any time, and buying high-valuation stocks in the hope of profits five or more years out can entail more risk than it appears. The AI threat may be overstated for some of these companies, but that alone may not prevent valuations from compressing as investors seek certainty in an uncertain environment.
Overall, our portfolios have held up well despite volatility and emerging risks. The global economy is slowing, but domestic employment remains solid—for now. A prolonged crisis in the Middle East could shift inflation from temporary to structural as companies pass through higher transportation and manufacturing costs. That could lead to higher interest rates, pressuring consumer, corporate, and government budgets and ultimately the economy. It will also create more pressure in private credit, a sector that has come under considerable pressure recently as investors realize those consistent returns may have been helped by lower rates and investor appetites. As investors begin to withdraw, valuations and liquidity are being tested.
If you feel more concerned after reading this letter, we understand—and we apologize. This is the reality of a highly unpredictable environment. That said, history has taught us the folly of trying to time markets or overreact to short-term events. We only need to look back at the last few years and the experience with tariffs and Covid to remember that the tide can shift quickly in both directions.
From our perspective rest assured we are not complacent in the face of these risks. We are allowing dividends to accumulate as we wait for more attractive entry points in select companies. We are also scrutinizing our holdings closely and, when warranted, trimming or exiting positions. Markets will fluctuate; the long-term value of quality businesses, far less so. As always, we remain focused not on predicting the next quarter, but on owning assets that will be worth more, in real terms, over time.
We wish you the best as we head into spring and welcome any comments or questions you may have.
This commentary is for general information only, based on information available as of March 31, 2026, and does not constitute investment advice, an offer, or a recommendation. Market conditions may change and Doherty & Associates Ltd. assumes no responsibility for decisions made in reliance on this information; investors should consult their Portfolio Manager before investing. References to specific securities are illustrative only and performance is not guaranteed. This document may contain forward-looking information subject to risks and uncertainties. Information as of March 31, 2026.