January always feels like being shot out of a cannon for us. So far in 2026 we have topped up Tax Free Savings Accounts, Registered Education Savings Plans, allocated to a new private equity fund, a new public equity fund and rebalanced accounts to ensure we are locking in gains and maintaining portfolio discipline.
With tax season on the horizon (late March/early April), please ensure you have access to Client Connect and your Vault so we can send you tax documents securely. If you need help please reach out to Galit.
If there’s anything else we can help with, please let us know.
Wish you a healthy and prosperous 2026,
Tom, Galit & Victor
Market Commentary
Considering how strong returns were by the end of 2025, it’s easy to forget what investors had to endure to get there. The first major shock came barely a month into the year, when the Chinese AI model DeepSeek triggered a sharp selloff in tech that quickly spread across markets. After partially clawing back, markets were hit again in early April when President Trump announced massive, sweeping tariffs. So called, “Liberation Day” ended up sending the S&P 500 down nearly 20% in just a few days.
That selloff came at an especially precarious time for us, as our transition to Wellington‑Altus was in early May. Fortunately, our disciplined, model‑driven investment process allowed us to lean into the weakness and execute buys across client portfolios in April, positioning us well for the rebound that followed.
I bring up the challenges of 2025 because it’s important to remember that meaningful returns rarely come without some discomfort. To earn an 18% return from the S&P 500 last year, you had to lose roughly that much twice along the way. That kind of ride is too bumpy for most people, which is why portfolios need shock absorbers — something to keep investors comfortable enough to stay invested. Building portfolios that strike the right balance — a smoother experience without giving up performance — is what we focus on every day. Pairing these portfolios with detailed financial planning helps clients understand their investments in the context of their goals, further cushioning the ride and supporting discipline.
Looking ahead, the investment landscape really is a tale of two narratives. On one side, the constant disruption of the economic, social, and political status quo continues to unsettle investors. On the other, we’re in the midst of an industrial and productivity boom driven by AI, major government spending on defence and infrastructure, and new opportunities for individuals to finally participate in the massive private‑market opportunity set.
Given all this, a pragmatic approach is the only sensible one. We are rebalancing portfolios toward greater diversification and higher quality. We need to participate in the good, protect against the bad, and stay flexible for the unexpected. We’re prepared.
Chart of the month: Returns have been all about the Magnificent 7
Mag 7 vs. Everyone Else – Apollo Academy
The Magnificent 7 (Mag 7) – Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia and Tesla – have contributed a staggering portion of equity market returns in recent years. By missing out on only one of these stocks, Nvidia, an investor would have earned almost 2% per year less than the S&P 500 over the past ten years. This concentration of returns in just a few stocks underscores how difficult and risky stock picking is. Unless you owned these seven stocks, with high allocations, it was very difficult to match the performance of the S&P 500 index.
Content Recommendation
When Howard Marks speaks (or writes a memo), all investors should listen (Warren Buffett says he does). The founder of Oaktree Capital, Howard Marks has solidified himself as one of the great orators of investing over the past several decades. He has an unparalleled ability to identify critical market dynamics and to explain them in an approachable manner. His calm, rational, pragmatism has inspired me for years, “You can’t predict, you can prepare”.
Is It a Bubble?–The Memo by Howard Marks – Apple Podcasts
Portfolio strategy
Debt
Liquid fixed income
- Our bond portfolio accomplished it’s goals last year, providing high single-digit returns while diversifying portfolios and stabilizing returns, particularly during the April sell-off.
- Credit spreads are near record tight, indicating that risk sentiment/risk taking is high and value is low. Thus, the bond portfolio continues to move to higher quality.
Private credit
- Although private credit remains attractive, we believe the opportunity is less compelling than in the past few years when we were earning double-digit yields.
- New opportunities in private assets (equity and infrastructure) could provide better return profiles.
- We have improved the quality and reduced exposure.
Equity
Public equity (stocks)
- Investing in market index funds has proven highly effective. The chart above emphasizes the benefit in the U.S. market, but the same is true in Canada where gold companies delivered a large portion of returns. Gold companies aren’t typically favoured by active stock pickers, so many missed the gold run.
- The concentration tech/AI is a two sided coin, risk on one side, opportunity on the other. These are stellar companies but all investors should question how much exposure they want and do they want to add even more concentration risk to their portfolio.
- We are reducing some S&P 500 exposure in favour of an active manager. This will allow for a more tactical approach and help reduce concentration risk in the Mag 7.
Private equity
- We are thrilled with the incredible progress our private equity portfolio has made in the past year, including multiple allocations to the highest quality managers. We now have outstanding diversification and quality within private equity.
- Continued signs of an uptick in deal activity, contributing to an optimistic outlook that we are in the early days of a new private equity cycle.
- We are excited about our allocation to a Canadian manager, Dawson Partners. They buy stakes in big private equity funds from institutional investors seeking liquidity. This fund is structured to generate steady returns, downside protection and it produces regular tax-efficient distributions.
Real assets
Real estate
- Valuations in commercial real estate seem to have bottomed.
- We believe there could be a case building for diversified real estate exposure in the most conservative portfolios as bond yields fall and equity valuations peak. We are monitoring.
Infrastructure
- AI, national defence, transportation, energy…these all require substantial capital to develop and/or modernize. Governments do not have the money, so increasingly partnering with private investors like KKR to fund projects.
- Combining long-term contracts and competitive advantages with secular growth industries/companies may be a winning formula.
- Excellent returns out of the gate from our KKR infrastructure investment.
