MONTHLY MARKET MUSINGS

March 2026

Emotions Continue To Steer The Ship

February brought more volatility to the markets as anxiety stemming from AI and the tech sector continued to keep investors on edge. The Q4 earnings results for the S&P 500 Index remained solid with approximately 75% of companies beating earnings and revenue analysts' consensus expectations. Despite the cautious sentiment throughout, the tech sector continued to produce very good results for the most part. The tech sector saw earnings up over 17% year-over-year with over 87% of companies beating earnings consensus estimates and revenue consensus estimates.[1] Many large tech companies posted strong positive earnings results and solid quarterly guidance, but shares saw downside pressure as it would seem that topping analysts' estimates is simply not enough. This tends to be something that happens when markets trade more on sentiment and emotion rather than actual fundamentals. We also saw the AI narrative shift in an interesting way this past month. In the latter half of 2025, the ongoing concern was that the market was being overly optimistic about AI and that a large bubble was forming. The idea was that AI would not have the success that was being priced into the AI stocks, notably the semiconductors. Fast forward six months and now the narrative has become "AI is going to be so successful that it will disrupt most sectors and industries" and this was followed by pressure on several industries including software, consulting, etc. We have also seen some pressure on semiconductors which is odd given that AI success should equate to further semiconductor success. So, is AI going to be an overhyped failure or an overly successful disruptor that changes the entire economic landscape? The truth, as it often is, will likely lie somewhere in between, AI will disrupt and change sectors and industries, but it will also fail in some capacity and won't be as transformative in certain areas as predicted.   

As we have noted in the past, many investors often tend to get caught up in the headlines and while it is difficult at times to see beyond them, it is in the best interest of their portfolios to try and avoid falling into that trap. Articles often get recycled throughout the media and this tends to build a perception that sentiment is more negative than it actually is. This can be seen in the snapshot below; the article was produced by one of these media outlets yet was published by multiple giving the impression that this view is shared by many. This plays into investors biases and acts as a reinforcement to confirmation bias, recency bias, as well as others. This can also trigger the loss aversion bias and cause small corrections from the all-time highs to have a disproportionate asymmetric impact on investors' perception of the overall market.

The takeaway for investors should be that reasons to justify an opinion can always be manufactured, but when we see the narrative head in the exact opposite direction, but equities have a similar reaction then it is not the fundamental story driving the short-term trading and market moves. The recent U.S. military action in Iran has added similar stress and noise to the already anxious market and caused further deviation from the positive foundation underpinning the current bull market. When this type of dislocation happens, it can create good buying opportunities for those willing to stick to the fundamental picture and not be deterred. In the end, the market does tend to get things right, but it does not always take the most direct path.

JAY SMITH, CIM®, FCSI®

Senior Portfolio Manager & Senior Wealth Advisor    

jay.smith@cibc.ca

BRAD BROWN, MBA, CFA®
Portfolio Manager & Associate Investment Advisor

brad.brown@cibc.com