Investing Perspectives Q1 2026

The first quarter of 2026 was a good reminder that markets can change course quickly.  Coming into the year, investors were increasingly comfortable with the idea that inflation was easing, interest rates would move lower and the same narrow group of large-cap growth stocks would continue to lead the market. By the end of March, that view had been tested. The war in the Middle East pushed energy prices sharply higher, complicated the inflation picture and made the outlook for interest rates much less straightforward.

One of the more interesting aspects of the quarter was that the usual playbook did not work particularly well. Traditional safe havens did not all provide the protection many investors would normally expect.  Gold was strong going into the quarter but then sold off sharply in March. Government bonds, the U.S. dollar and other defensive assets also gave investors a mixed result.  That does not mean those assets have lost their usefulness, but rather that traditional hedges do not always respond in the way investors expect when the sources of market stress shift.

The quarter also served as a reminder that concentration risk remains real. Over the last two years, a relatively small group of very large technology companies had driven a disproportionate share of market returns. That leadership came under pressure in Q1.  By the end of March, the S&P 500 was in loss territory and had experienced its weakest quarterly result since Q3 2022.  The largest U.S. technology shares fell materially, with the “Magnificent Seven” (Apple, Microsoft, Alphabet, Nvidia, Meta and Tesla) down an average of about 12%. Even outstanding businesses can become vulnerable when expectations get too high or when the market starts to focus on a different set of risks.

Central banks also became less of a source of comfort than many investors had expected. In March, the Bank of Canada left its policy rate unchanged at 2.25% and made clear that if higher energy prices fed through into broader inflation, further rate increases were still possible. That was a meaningful signal. Investors had become used to the idea that any signs of weaker growth would quickly lead to lower rates. In the first quarter, that assumption looked less reliable.

Taken together, these developments made for a more difficult and less predictable quarter than many expected at the start of the year. Oil and gas prices rose sharply, global equity markets sold off in March and confidence in a smooth path toward lower inflation and lower rates weakened. We don’t think the long-term picture has necessarily changed entirely, but the range of possible outcomes looks wider today than it did three months ago.

Within that market context, the US stock market lagged far behind the Canadian market in the first quarter.  The S&P 500 returned -4.3%, while the S&P/TSX Composite gained +3.9%.  Canada benefited from its heavier exposure to energy and material stocks, which accounted for essentially all the index’s first quarter return as oil and metals prices rose sharply during the period.

Portfolio Update

Q1 2026 returns from Bridgeport’s publicly traded equity and income portfolios ranged from +2.4% to -3.1%.

The Bridgeport Canadian Equity Fund earned 2.4%* in Q1 2026, led by Cenovus Energy, whose share price appreciated 59%**, Suncor (+52%) and Cameco (+20%).  Detractors from performance included Colliers International (-26%) and Constellation Software (-26%).

The Bridgeport US Equity Fund lost 1.5% in the first quarter.  Contributors to the portfolio included ConocoPhillips (+42%) and Applied Materials (+33%).  Detractors included LVMH (-27%) and Microsoft (-23%).  During the quarter, we added S&P Global to the portfolio.  The company is a market-leading provider of financial data and analytics, including its well-known ratings platform.

The Bridgeport Small & Mid Cap Equity Fund declined 3.1% in the first quarter.  Contributors included Rogers Corp. (+17%) and Canfor (+17%).   The fund experienced declines from Allied Properties (-30%) and Savers Value Village (-20%).   The acquisitions of Dental Corp. and Guardian Capital both closed during the quarter, with both holdings taken private at significant premiums to our original purchase prices.  New additions to the fund in Q1 included Rockpoint Gas Storage, a North American provider of natural gas storage, and Pet Valu, the Canadian market share leader in pet food and related products.

The Bridgeport Multi-Asset Fund returned +1.6% in Q1 2026.  Contributors included Cenovus Energy (+59%) and ConocoPhillips (+42%), while detractors included LVMH (-27%) and Colliers International (-26%).

The Bridgeport High Income Fund was up 0.20% in the first quarter as interest and dividends income was largely offset by underlying volatility in the fund’s fixed income and equity investments.

Bridgeport’s private asset portfolios generated modestly positive returns in the first three months of the year.  The Bridgeport Private Equity Opportunities Fund returned +2.3%, driven by strength in its secondary private equity strategies, which purchase existing PE fund interests from other investors, typically at a discount.  The Bridgeport Alternative Income fund earned +1.6% in Q1 2026, with major contributions coming from income generation across a wide range of strategies as well as strong performance from special situation funds managed by Bain Capital.  The Bridgeport Private Real Estate & Infrastructure Fund earned +0.4%, with results driven primarily by infrastructure strategies. 

We also made three new private asset investment commitments during the quarter: Atalaya Capital in opportunistic lending, Bridge Investment Group in value-add logistic-oriented real estate and Portfolio Advisors in secondary private equity.

Final Thoughts

The first quarter showed how quickly market expectations can shift, especially when investors have grown comfortable with a particular view.  We think this reinforces the value of balanced portfolios built around attractively priced investments with strong underlying cash flows.

Thank you, as always, for your continued trust and confidence. Please feel free toreach out with any questions.

Notes

*Bridgeport fund investment returns disclosed in this report are before fees.

**All share price returns disclosed represent Q1 2026 returns before dividends unless a share holding was initiated during the quarter in which case the share price return is calculated from the date of Bridgeport purchase.