Jean-François Dumais*, Investment Strategy Manager at the Bâtirente financial services firm, shares our funds’ performance along with his insights on the economy and financial markets. This edition reviews the situation in the third quarter of 2026.
Economy
During Q3 2026, economic conditions were significantly impacted by the Iran conflict. The ongoing conflict has put upward pressure on oil prices (+40%) and on inflation.
Inflation
As of September 30, 2026, Canada’s inflation rate stood at 3.1%. This rate was above the 2% target. In the United States, the inflation rate was 3.7% as of the same date.
Policy rates
In Canada, due to inflationary pressures, market participants anticipate a 0.25% increase in 2026. This would take the rate to 2.50%. In the United States, the Federal Reserve (Fed) raised its policy rate by 0.25% in 2026, bringing it to 4.0%. Due to inflationary pressures, the rate is expected to rise to 4.25% by the end of 2026.
Is a recession looming?
Canada’s economic growth is weak, with gross domestic product (GDP) increasing by 1.4% year over year. It should be noted that Canada recorded two consecutive negative quarters (Q4 2025 and Q1 2026), meeting the definition of a technical recession. U.S. economic growth has remained relatively stable, with GDP up 2.2% year over year.
Markets in Q3 2026
Bond markets fell significantly in Q3 due to inflationary pressures. In the equity markets, there was a slight increase in Canada (driven by gains in oil-related stocks) and in global equities.
Equities
The ongoing conflict in Iran has resulted in a relatively weak performance in the stock markets. The MSCI All Country World Index (ACWI) recorded a return of 1.7% in Canadian dollars. Developed market equities (MSCI EAFE), including those in Europe and Asia, generated a return of 1.0%; U.S. equities returned 2.4%; while emerging markets equities posted a return of -0.3%, all in Canadian dollars. Meanwhile, Canada’s main equity index (S&P/TSX) delivered a return of 1.6%.
Bonds
Bond yields rose significantly, driven largely by inflation caused primarily by the conflict in Iran. As a result, the FTSE Canada Universe Bond Index recorded a sharply negative return of -3.0%.
Q3 2026 Bâtirente Fund performance
Bâtirente Diversified Funds: between -1.1% and -1.7%
Treasury Multi Fund: -0.7%
Bond Multi Fund: -2.8%
Global Equity Multi Fund: -0.1%
Canadian Equity Multi Fund: 0.1%
Global Small Cap Equity Multi Fund: -1.0%
Market outlook for the last quarter of 2026
The United States is poised to play a pivotal role in the markets during the last quarter of 2026. The Trump administration could be the source of increased volatility.
Key risks to monitor include:
- The ongoing conflict in Iran could lead to a market decline and a further increase in oil prices;
- After four years of strong performance, stock markets are trading at fairly high valuations. Semiconductor stocks, fuelled by AI hype, delivered particularly strong returns (596% over 4 years). In October, these stocks are under pressure;
- The U.S. midterm elections are approaching; historically, this period is accompanied by lower stock market returns;
- The trade war with the United States could put pressure on Canadian equities.
Given the current market environment, it’s essential to adopt a portfolio diversification strategy, such as that offered by Bâtirente Funds.
Sources: Bloomberg and Desjardins Financial Security
*Jean-François Dumais has worked as an Investment Strategy Manager at Bâtirente since 2019. Along with a Master of Business Administration (MBA) degree (Finance specialization), he has over 20 years’ experience in financial markets.