THIS WEEK'S OUTLOOK – March 30, 2026 - Aimstar Capital Group Inc.

Key Focus This Week: “Growth Concerns and Policy Uncertainty Keep Markets Cautious”

During the past week, North American equity markets were primarily driven by three key macro factors, with heightened volatility reflecting growing uncertainty around inflation, monetary policy, and geopolitical risks.

First, escalating geopolitical tensions in the Middle East became the dominant catalyst for global markets. Concerns surrounding potential disruptions to oil supply, particularly involving Iran, pushed crude prices sharply higher, with Brent crude approaching the mid-$110s per barrel at peak levels during the week. Although there were brief pullbacks following headlines suggesting delays in military action, oil prices remained elevated overall. This surge in energy prices has increased the risk that inflation may reaccelerate, potentially complicating the outlook for monetary policy in the coming months. Investor sentiment may turn more defensive, and broader equity markets experienced pressure due to rising input costs and macro uncertainty.

Second, uncertainty around the U.S. Federal Reserve’s policy path intensified. Recent comments from Federal Reserve Chair Jerome Powell reinforced a data-dependent approach, noting that interest rates could move in either direction depending on how inflation and economic growth evolve. While policymakers remain in a wait-and-see mode, markets have interpreted recent developments as reducing the likelihood of near-term rate cuts.

At the same time, elevated energy prices have added complexity to the policy outlook by introducing renewed upside risks to inflation. This combination of policy uncertainty and inflation risk has contributed to fluctuations in Treasury yields and equity valuations, particularly within rate-sensitive growth and technology sectors.

Canadian economic data will come into focus, particularly the release of January GDP by Statistics Canada scheduled for March 31. This data will provide an important update on domestic economic momentum at the start of 2026. Recent indicators have pointed to subdued growth conditions, although the upcoming release will be critical in confirming whether economic momentum has weakened further at the start of 2026.

Recent communication from the Bank of Canada highlights increasing concern over structural economic headwinds, including weaker investment, trade uncertainty, and slower productivity growth. These factors are expected to weigh on the medium-term outlook and influence future policy decisions

Oil Price Surge Drives Inflation Concerns

Energy markets were the dominant driver of global financial conditions during the week, as geopolitical tensions in the Middle East intensified. Concerns over potential supply disruptions pushed Brent crude prices to above $110 per barrel at intraday highs, marking a significant increase compared to prior weeks. According to Reuters, the move was primarily driven by escalating tensions involving Iran and uncertainty around potential military actions. Although prices experienced some pullback following reports of delayed escalation, they remained elevated overall. The sharp rise in oil prices has led to a reassessment of inflation risks, with markets increasingly pricing in the possibility that energy-driven price pressures could delay the disinflation process.

Federal Reserve Maintains a “Wait-and-See” Stance

Monetary policy expectations remained broadly stable during the week, as Jerome Powell reiterated that the economic outlook remains uncertain and that the Federal Reserve is not yet at a point where policy adjustments are required. He emphasized that the current policy stance is “well positioned,” allowing policymakers to remain patient and assess incoming data before making further decisions. This reinforces the view that the Fed is currently in a holding phase, with no immediate urgency to either tighten or ease policy.

He also addressed the impact of tariffs, characterizing related inflationary pressures as likely a one-time price shock, with an estimated impact of approximately 0.5% to 1%. Importantly, he reaffirmed the Federal Reserve’s commitment to bringing inflation sustainably back to its 2% target, signaling that temporary price pressures alone would not be sufficient to alter the broader policy trajectory.