Economic and political chaos continued into the first half of 2026, but you wouldn’t know it from the performance of financial markets.
In the first six months equity markets both home and abroad advanced by close to double digits and fixed income is squeaking out decent yields.
That means investors with diversified portfolios that span asset classes, sectors and geographic regions have plenty to celebrate.
Since January 1, returns from the Canadian benchmark TSX Composite Index and the S&P 500 – the benchmark for global equity markets – are even at 9.3 per cent.
Canada churns out value despite trade threats
As the July 1 deadline to lock in a new North American free trade agreement came and went, big Canadian bank stocks gained in value from 20 per cent to 40 per cent, while maintaining consistent dividend payouts.
The entire Canadian financial sector, over one-third of the index, performed well along with materials including gold and base metals.
Energy stocks were flat to down as crude oil prices navigate supply disruptions caused by the war in Iran.
Overall market strength on the TSX was broad despite a pullback in tech valuations.
Shares in Canada’s big three telecom providers – BCE (down 4.6 per cent), Rogers Communications (down 10 per cent) and Telus (down 15.6 per cent) – were also a drag on the index.
Artificial intelligence continues to drive global markets
The S&P 500 information technology sector posted a 26 per cent gain in the first half of 2026 driven by artificial intelligence (AI) infrastructure and semiconductor demand.
Industrials gained 17 per cent from a jump in spending on data centre construction and defence.
Financials, health care, utilities, consumer staples and real estate posted slightly negative returns.
Canadian investors who trade a good chunk of their portfolios in U.S. dollars are getting more bang for their greenbacks. The value of the loonie has fallen to 70 cents U.S. from 73 cents last year.
Fixed income keeps on giving
First half returns were tempered for portfolios with heavy weightings in fixed income. Investors nearing, or in retirement, tend to take on a larger portion of fixed income to hedge against risky equity markets.
The cost of that hedge, however, has been relatively low. As an example, one-year guaranteed investment certificates (GICs) are yielding between 2.75 per cent and 3.65 per cent.
5-year GICs are paying out between 3.1 per cent and 4.1 per cent. The highest rates come from alternative, online-only, banks with the big banks posting slightly lower rates.
How does your portfolio measure up?
If you are looking at your investment statements over the past six months and not seeing a correlation with the benchmarks, there could be a number of reasons.
- Big cash and fixed income weightings stunt returns, but even equity returns will be cropped if the holdings are too conservative. Diversification also means a good mix of risk levels.
- If results don’t reflect returns from the benchmarks, your portfolio might not be properly diversified. A qualified investment advisor should be able to help strike a balance between your return expectations and how much risk you are prepared to take on.
- Returns that far exceed the benchmarks due to a few hot investments could also mean your portfolio is not properly diversified and gains will be unsustainable over the long run. It presents a great opportunity to trim the winners and add to under-represented positions.
- If your portfolio returns fall far below the benchmark, fees could be taking an oversized bite from your investments. Some mutual funds charge more than three per cent of the amount invested annually, which severely dampens returns. Speak with an advisor or the institution that sold you the funds about lower cost alternatives.
