Opportunities Amongst a Rollercoaster of International Diplomacy
In this newsletter, I want to provide you with a deep dive into the markets, global events, and the impacts they have had on markets and your portfolio over recent months.
However, before doing so, I want to reassure all of you that as we navigate through market volatility, we continue to manage for a number of client objectives, whether it be tilted towards income needs or more growth oriented. Recall that equities are designed for superior long-term returns and protection against inflation. All clients need a varying degree of exposure if their time horizon warrants. These are longer term holdings ideally held in the 10+ year silo. For those of you with upcoming cash needs, income requirements, and those of you nearing or in retirement, we continue to protect against temporary declines with what is called a cash wedge. A cash wedge doesn’t mean money sitting on the sidelines doing nothing like cash sitting in a bank account, but rather it represents shorter-term investments, in what we call the shorter term 1–5-year silo and sometimes the medium term 5–10-year silo, that can be easily accessed. Some of these cash wedges include bonds, mortgages, and interest-bearing fixed income investments available to sell at a moment’s notice in order to prove you with needed income or liquidity during a downturn. They can include both public and private equity investments of varying terms. This allows us to supply cash to you without needing to sell stocks, and for those of you with longer term investment horizons, can be sold to buy into market opportunities when they arise. We continue to monitor the global situation, how it is unfolding, what it means for your portfolio, and as a result, make the necessary changes without emotional interference. I hope you find the following summary of recent global events informative, and helps to better understand how recent global events have shaped the markets and economy you are seeing today.
As we close out the first quarter of 2026, I feel it is safe to say that the news has been anything but quiet when it comes to international diplomacy, geopolitics, and most notably, the impacts on international relations. New markets for investment are opening up that were previously less attractive, and previously attractive markets are now posing new challenges for investment. The balance of trade has also fundamentally shifted with new trade agreements being forged, and as a result, creating a more integrated, globalized world even if this is to the dismay of some world leaders.
There have been numerous changes to the global order this year, notably the EU-Mercosur trade agreement that aligns much of South America with the European Union, thus reducing dependence on the US and China. Defense pacts between Canada and Korea for increased military spending and force modernization, and Japan re-electing the Takaichi government into a supermajority allowing them to rewrite their US imposed Post-WW2 constitution which the government intends to do to modernize the country’s economy and military in the face of an increasingly rising China. Then we have the US incursion into Venezuela to capture Nicholas Maduro in an attempt to influence regime change and establish US energy interests in the region. Notably, all of the above items happened before February 28th 2026!
However, the most significant event of 2026 so far has been the US and Israeli campaign against Iran. While the aforementioned events moved markets in their respective geographic regions, markets around the world reacted sharply to the launching of combat operations in Iran. With increasing escalation, and no end in sight, US markets have pulled back sharply. The S&P500 declining 5.09%, DJIA -5.38% and NASDAQ -4.75% since February 28th to market close on March 31st. Other countries have not fared well in the markets either as uncertainty continues to loom over energy fears – Japan declining 13.23%, Korea -19.08%, Germany -10.30% and France -8.90% and Canada -4.58 %. I don’t bring this up to be doom and gloom, but rather to discuss opportunity in the markets as we have spent the last month reducing the downwards impact of markets on your investments as much as possible to make the upswing after the crises end much more meaningful.
Historically, times of crisis have been the best times to make money and under President Trump, this is the second of such instances in a 12-month period. The last was April 2025, caused by Liberation Day. Following the postponement of tariffs, new trade deals between the so called “middle powers”, and countries negotiating with the USA, we witnessed global markets recover in stride and do so in a very short period of time. Almost a year to the day since President Trump stood at the podium holding up the board outlining “reciprocal tariffs”, we find ourselves in a new bout of market turmoil. However, the difference this time is the off ramp isn’t so easy. Following a breakdown of negotiations in Geneva over the Iranian nuclear program, the US and Israel eliminated the overwhelming majority of Iran’s leadership and went on to strike multiple targets across the nation. In response, Iran began firing back across the Gulf region at almost all neighboring nations with Ballistic missiles, and then waging economic warfare by closing the strait of Hormuz. With continued escalation occurring, and other nations contemplating an entry to the conflict in both defensive and offensive roles, the off ramp from conflict may not be so easily found as it was with tariffs.
With the Strait closed, 20% of global oil is stuck in the Persian Gulf, fuel costs are rising around the world, and the most impacted by this is Asian and European countries as they heavily rely on Middle Eastern oil. Those with strategic Petroleum reserves are faring better, but the longer-term consequences of this conflict may yet to be seen. If the situation persists, we will likely see a return of inflation, not only in gas, but in food and agriculture related items. Our research Analyst Alex McCallum speaks more about this in his article reviewing markets and the first quarter of 2026.
Other factors to consider is now that Houthi rebels have entered the conflict on the side of Iran, should they opt to close the Bab-Al-Mandeb Strait as they did in 2023-2025, this would cut off more shipping lanes, forcing ships to transit around the horn of Africa. The second challenge this would pose is it would isolate the two biggest extraction economies on the planet, Middle Eastern Energy, and African rare earth minerals. If this were to occur, it would have a much more significant impact on global economies given the inflationary risks this poses because of supply shortages, but in turn, highlights other regions that could emerge as winners.
What this means for you is that there are plenty of opportunities around to take advantage of. In this crisis, we see a few specific industries with increased prominence: energy, materials, and defense. In the energy space, countries are being forced to reckon with how they manage their energy supply chains. Outside of the Middle East, Canada and the Scandinavian countries may become winners on account of sanctions against Russia which are only being temporarily lifted for 30 days. Norway and Canada are both large oil and LNG producers, and can develop the infrastructure as first world nations to ship energy to trade partners, thus reducing dependence on other producers.
Other forms of energy may come to the forefront, including nuclear power which has been gaining increased traction and Canada is the second largest producer of global uranium supplies, the first being Kazakhstan. Another opportunity here is for Canada to become an electricity exporter to the United States much like Ontario already does to the Eastern Seaboard via nuclear power exports.
Other opportunities can be found around the globe within Europe and Asia given their market decline over the last month. Prior to this conflict, both markets were very attractive to us, and since we liked them a month ago, we like them even more now that they are 10-15% discounted. Asia being one of the most dominant manufacturing and technological hubs, most notably for technology, semi-conductors and high-tech electronics used in day-to-day life. Then we have Europe being a massive market for consumer spending on fashion, automotive and chemical production, as well as pharmaceuticals and green energy infrastructure. However, both these regions have also been rising on account of another industry that competes with the United States – Defense spending.
NATO is boosting defense spending to counter Russian aggression in the east as it passes the four-year anniversary of its brutal war of attrition in Ukraine. China looms over Taiwan with Asian countries being increasingly concerned over a potential invasion seeking to achieve Beijing’s one China policy, and in the Persian Gulf, countries countering Iranian missiles continue to fire off interceptors to protect themselves. For those comfortable investing in the military defense contracting industry, the opportunity is clear – warfare has changed, and NATO partners as well as some of our Asian partners are spending money hand over fist to upgrade equipment and prepare for the next generation of conflict should it ever come to our doorstep. American aircraft and air defense systems, Swedish jets, French radar systems, German tanks, Korean submarines, Canadian cybersecurity, and many more lead the pack with advanced technologies that spill into our daily life. For many NATO countries, the mantra of President Theordore Roosevelt is coming back to the forefront – “speak softly, but carry a big stick”.
As we have seen over the last year, and notably these last three months, economies have continued to strengthen ties around the world and build new alliances to navigate economic turmoil as well as strengthen their defensive positions to protect sovereignty. While there are still growing pains in the post “Liberation Day” world order, the lessons from a rollercoaster of diplomacy in Iran have shown us that these changes are necessary and cannot be ignored. As such, we continue to deploy capital into international investments, strengthen core fixed income positions, and monitor economic development to ensure that you have strong, robust portfolios based on fundamental analysis that stand up to market stress while also strategically and systematically taking advantage of opportunities that arise.
Written By: Adam Prittie
