Northern Trust Pension Universe Data: Flat Returns for Canadian Pension Plans in Q1 as Geopolitical Tensions Intensified
TORONTO–(BUSINESS WIRE)–
Canadian pension plan returns were tempered by political frictions and a volatile backdrop in the first quarter of 2026, with the median pension plan rising modestly by 0.4% for the quarter, according to the Northern Trust Canada Universe.
Financial markets felt the brunt of global events during the quarter. War in the Middle East and the closure of a critical energy supply passage sparked fears of a global energy supply shock and rattled markets across the globe, while trade uncertainty continued to linger in the face of ongoing policy shifts surrounding tariffs. A partial U.S. government shutdown created additional disruption, while technology stocks in North America experienced a significant decline as investors assessed the implications of new artificial intelligence capabilities and increasing levels of capital investment in the AI space.
Most major central banks chose to maintain their respective benchmark rates at their current levels throughout the quarter, while monetary policymakers remained mindful of elevated energy prices and the potential impact on inflation. Major equity indices, with the exception of the U.S., managed to produce positive returns for the quarter in Canadian dollar terms, with Canadian stocks leading the way. The Canadian bond market rose modestly for the period.
“Economies have remained resilient while navigating through what has been undoubtedly a tumultuous landscape. Pension plans continue to harness this resiliency by remaining focused on key underlying data, their core principles and the sound investment strategies formulated by plan sponsors to secure long term sustainability,” said Katie Pries, Country Executive for Northern Trust Asset Servicing in Canada.
The Northern Trust Canada Universe tracks the performance of Canadian institutional defined benefit plans that subscribe to performance measurement services as part of Northern Trust’s asset service offerings.
Equity markets were shaken throughout the first quarter as geopolitical tensions escalated and soaring energy prices weighed on investors. Despite strong corporate fundamentals underpinned by a resilient consumer, these events triggered volatility and reignited macroeconomic uncertainty. Notwithstanding the ongoing turmoil, most major stock indices witnessed positive returns for the quarter, however U.S. stocks experienced a decline over the period. The bond market navigated through a cloud of unpredictability and inflationary concerns concluding the quarter with a muted outcome.
- Canadian Equities, as measured by the S&P/TSX Composite Index, rose 3.9% for the quarter. The Energy sector outpaced all sectors, driven by the surge in oil prices. The Materials and Utilities sectors also witnessed attractive double-digit returns. Information Technology was the largest decliner, down over 22%, while the Health Care and Real Estate sectors were also weak performers within the index.
- U.S. Equities, as measured by the S&P 500 Index declined -2.6% in CAD for the quarter. The Energy sector was the best outperformer for the quarter followed by the Materials and Utilities sectors. The Financials, Consumer Discretionary and Information Technology sectors posted the weakest results over the period.
- International developed markets, as measured by the MSCI EAFE Index, advanced 0.7% in CAD for the quarter. Similar to North American indices, the Energy sector led performance with attractive returns from the Utilities and Materials sectors as well. Meanwhile, the Consumer Discretionary sector closed the period with a double-digit decline.
- The MSCI Emerging Markets Index gained 1.7% in CAD for the quarter. The Information Technology sector led performance across the index followed by the energy sector. The Communication Services and Consumer Discretionary sectors observed the weakest returns with double-digit losses over the period.
The Canadian economy felt the pressures of higher energy prices and U.S. tariff uncertainty throughout the quarter. The labour market exhibited signs of softening while the risk of inflationary pressures from the Middle East conflict remained top of mind. The unemployment rate finished the quarter at 6.7%, down from 6.8% in December, though over 100,000 net jobs were lost. The Bank of Canada (BoC) chose to maintain its key benchmark rate at 2.25% at both meetings held during the quarter. The BoC noted that risks to growth appear tilted to the downside, highlighting data pointing to weaker economic activity and elevated uncertainty and as a result would continue to assess impacts around trade uncertainty and U.S. tariffs.
The Canadian Fixed Income market, as measured by the FTSE Canada Universe Bond Index, posted 0.2% for the quarter. Federal bonds outperformed both provincial and corporate bonds while mid-term bonds outpaced both short and long-term bonds over the period.
The U.S. economy started the year on a firm footing, however higher inflation readings surfaced throughout the period challenging the economic backdrop. The Federal Reserve (Fed) held the fed funds interest rate steady throughout the quarter at 3.50 – 3.75%, as policymakers deal with a soft labour market, higher-than expected inflation readings, and the U.S.-Iran conflict in the Middle East. The Fed governor emphasized that it was “too soon to know” the economic impact from the war and noted that while the spike in energy would stoke inflation, the extent remains unknown.
International markets held up reasonably well during the first quarter in the face of elevated energy prices and inflationary challenges. The European Central Bank (ECB) held the deposit rate steady at 2.0%, emphasizing the impact soaring energy prices would have on inflation. The Bank of England (BoE) also elected to hold interest rates steady at 3.75% as it evaluates the U.S.-Iran conflict, as surging oil and gas prices add upward pressure on inflation. The Bank of Japan (BoJ) held rates steady at 0.75% as expected.
Emerging markets experienced positive returns for the first quarter despite global macroeconomic uncertainty and political tensions. The People’s Bank of China (PBoC) held its one-and five-year loan prime rates (LPR) steady at 3.0% and 3.5% respectively, amid surging oil prices and conflict tensions. The Central Bank of Brazil chose to lower its key Selic rate to 14.75% after previously holding the rate at 15% for a prolonged period. The Reserve Bank of India (RBI) held interest rates steady at 5.25% as forecasted.
About Northern Trust
Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of wealth management, asset servicing, asset management and banking services to corporations, institutions, affluent families and individuals. Founded in Chicago in 1889, Northern Trust has a global presence with offices in 24 U.S. states and Washington, D.C., and across 22 locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of March 31, 2026, Northern Trust had assets under custody/administration of US$18.6 trillion, and assets under management of US$1.8 trillion. For more than 135 years, Northern Trust has earned distinction as an industry leader for exceptional service, financial expertise, integrity and innovation. Visit us on northerntrust.com. Follow us on Instagram @northerntrustcompany or Northern Trust on LinkedIn.
Northern Trust Corporation, Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A., incorporated with limited liability in the U.S. Global legal and regulatory information can be found at https://www.northerntrust.com/terms-and-conditions.
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