It was an eventful start to 2026. In early January, Venezuelan President Nicolás Maduro was removed by the U.S. military and by quarter end a war in Iran was still unfolding. These events, combined with lofty AI-equity valuations, energy and inflation pressure, and policy and economic uncertainty, combined to create a challenging investment landscape.
Equity markets remained resilient through February, led by non-U.S. markets continuing their leadership trend from 2025. However, March saw a sharp reversal as the war in Iran rattled global markets. European, Asian, and emerging markets sold off amid growing concerns about an oil driven economic slowdown. The S&P 500 fell 6.4% from its January peak, and at -4.6%, had its worst quarterly performance since 2022. The S&P/TSX was comparatively stable, finishing at +1.1% in the first quarter, despite a 6.7% pullback in March.
U.S. Treasuries failed to attract their typical flight-to-quality demand in March. Instead, the 10-year Treasury yield rose from 3.96% to 4.32% through March, reflecting concerns that higher energy prices will reignite inflation, reduce the appeal of longer-dated fixed-income investments and increase expectations for central bank interest rate hikes.
In March, the traditional 60/40 portfolio of public equities and bonds had its worst month since 2022. Our reduced reliance on these asset classes resulted in strong relative performance during this period of elevated volatility. By quarter end, Newport’s five mandates had delivered slightly negative results but as of the time of this publication in mid-April, all were in positive territory for 2026.
First quarter allocations were directed to public equities across multiple geographies and market capitalizations. We are looking to opportunistically deploy capital and our disciplined approach favours scaling into downturns to utilize and protect our cash balance.
With cash yields lower at the time, we increased investment-grade exposure, enhanced yield, and hedged against rising volatility. The shorter-duration profile of this portfolio helps mitigate price risk in a rising-rate environment.
Private asset classes remain a strategic priority. They provide income and growth with historically low correlations to public markets. They also protect investors when equities and bonds both move in tandem to the downside as they did in the first quarter. We continue our active due diligence efforts in private equity, real estate, and private debt.
Regarding private debt: The asset class made news as retail-focused private credit funds and non-traded Business Development Companies (“BDCs”) capped redemptions to manage liquidity amid investor concerns about exposure to AI-impacted software companies.
Our private credit exposure predominantly focused on investing alongside experienced institutional investors through closed-end structures, where capital is committed for the medium-to-long term, and daily liquidity is neither required nor expected. When structured appropriately, private credit represents a fundamentally sound approach to business lending, supported by long-term capital rather than bank deposits. Newport partners with disciplined private credit managers who act as committed capital providers to the businesses they support, and we remain confident in our exposure to this asset class.
Beyond the societal toll, the war in Iran impacts oil prices, the economy, inflation, and interest rates. A slowdown in growth and an increase in inflation can also result in stagflation.
In such a backdrop, our investments in asset classes with pricing power – private real estate, infrastructure, energy, materials and consumer staples – should outperform interest rate sensitive investments in long duration bonds, highly leveraged companies, and high growth technology companies.
With consumer spending representing nearly 70% of U.S. GDP, labour market trends are critical. With U.S. and Canadian unemployment rates currently at 4.3% and 6.7%, respectively, our concern would be that any potential economic slowdown would translate into broader employment softness.
Despite uncertainty, positive indicators do exist. Bearish market sentiment has reached levels that have historically served as a bullish contrarian indicator. The potential for a peace deal or a definitive reopening of the Strait of Hormuz should result in a market rebound, for which we are positioned. Finally, history suggests that equity market drawdowns of roughly 10% often prompt policy support from the U.S. Federal Reserve, helping to restore stability and confidence.
Nevertheless, we expect unpredictability and volatility to persist, so an elevated dose of caution remains essential. Our confidence in our multi-asset class strategy, our investments and our ability to protect your capital remains strong. We are grateful for the trust you place in us to manage your hard-earned wealth.
We look forward to sharing more ideas and insights with you in the months ahead.
To find out more about Newport’s unique investment approach and discuss how our strategies align with your goals for 2026 and beyond, get in touch.
Kyle Smith, MBA, CFA® is a Managing Director & Portfolio Manager and a member of Newport Private Wealth’s Investment Committee.
