Market Recap* – March, 2026

1. What happened in the markets?

Markets experienced significant volatility in March amid escalating war in the Middle East. Oil prices climbed sharply – from around $70 USD per barrel before the conflict to over $119 following the closure of the Strait of Hormuz – reviving concerns about stagflation and diminishing expectations for central bank rate cuts. However, sentiment rebounded on the final trading day, as renewed optimism about a possible end to the Iran war fueled a broad market rally.

Canadian equities declined 4.3% in March, with sector performance varying widely. Energy was the top performer, rising 8.2% on the back of surging oil prices. In contrast, Materials lagged significantly, dropping 16.4% as gold prices fell sharply. Notably, gold did not behave as a typical safe-haven asset despite elevated geopolitical tensions. Two key factors contributed to this decline: (1) investors often sell high-performing assets during periods of market stress to offset losses elsewhere, and (2) higher energy costs pushed up inflation expectations and increased the likelihood of interest rate hikes, weighing on non-yielding assets like gold.

U.S. equities fell 5% over the month, with sector performance diverging significantly. The Energy sector was the clear standout, gaining 10.4% and emerging as the only sector to post positive returns in March, supported by a sharp rise in oil prices. In contrast, Industrials lagged, declining 8.4% and ranking as the worst-performing sector. The ongoing conflict in Iran kept energy prices elevated and market volatility high, as investors grew increasingly concerned about the potential for a prolonged energy shock and its broader economic implications.

As global equities declined, fixed income offered limited protection. Rising inflation expectations, increasing yields, and fading prospects for rate cuts weighed on the asset class, resulting in a 2% decline in Canadian bonds for the month.

Money market instruments delivered a steady return of 0.16%, with short-term government securities providing consistent income and minimal price volatility. This allocation continued to act as a stabilizing force amid market fluctuations and ongoing geopolitical developments.

The Canadian dollar weakened in March, primarily driven by heightened safe-haven demand for the U.S. dollar amid escalating conflict in the Middle East. Despite higher oil prices – which would typically lend support to the Canadian dollar – investors gravitated toward the USD as a more secure asset.

2. What does it mean for Embark Funds?

Asset class	Change	Impact on cohorts
Canadian Equities	↓	Negative for younger, growth-oriented cohorts. Concerns about the potential impact of a prolonged conflict in the Middle East weighed on performance across most sectors.
U.S. Equities	↓	Negative for younger, growth-oriented cohorts. Concerns about stagflation – characterized by rising inflation and slowing economic growth – weighed on U.S. equities.
Bonds	↓	Negative for older and more conservative cohorts. Fears of stagflation diminished the likelihood of near-term rate cuts by the Bank of Canada.
Money Market	↑	Short-term government securities delivered steady return amid global uncertainty.
Canadian Dollar	↓ CAD	The weaker Canadian dollar provided a lift to younger cohorts with more foreign exposure. While higher oil prices would typically support the CAD, increased safe-haven demand for the U.S. dollar offset that impact in March.