April 2026 Market Highlights

April 2026 Market Highlights 

 

Dear Client,

Two months after the U.S. and Israel attack on Iran shook markets, key equity indices around the globe recovered in April from March slumps, with the S&P 500 and Nasdaq both posting double-digit gains for the month. A ceasefire announced April 8th no doubt helped propel markets higher but the Strait of Hormuz, through which 20% of the world’s energy supply travels, remains closed. Strong U.S. Q1 corporate profits on rising profit margins also cheered investors in April, but while Wall Street rallied Main Street continued to feel pain at the gas pump and in the grocery aisles. March inflation data showed some initial effects of sharply higher energy-cost inputs and central banks, while broadly holding rates during the month, almost universally expressed concern about future inflationary pressures driven by the major disruption in energy markets.

For the month, the S&P/TSX Composite Index rose 3.81%, the S&P 500 Index jumped 10.47%, the Nasdaq Index climbed 15.31%, the MSCI World Index gained 8.88% and the MSCI EAFE Index rose 5.08%. In the U.K., the FTSE 100 Index inched up 2.28% while Germany’s DAX Index added 7.11%. In Asia, Japan’s Nikkei 225 gained 16.11% and the MSCI China Index added 3.39%. In the U.S., the yield on the 10-year Treasury note eased downwards in April to 4.25% before rising to end the month just under 4.4% (yields fall as prices rise). The FTSE Canada Universe Bond Index ended the month up 0.12%. Gold edged up 0.03% and Brent crude gained 3.64%.

Monthly developments

The U.S. economy grew at a 2% rate in Q1 with large Artificial Intelligence (AI)-related investment being a key contributor. The turnaround came after a weak Q4 2025 hampered by the fall government shutdown, but the economy didn’t expand quite as fast as economists expected in Q1, with forecasters expecting 2.2%. Google, Amazon, Microsoft and Meta collectively reported $130 billion in capital expenditures during Q1, 71% higher than a year ago, as they rushed to build AI data centers. AI is driving spending on computer chips and servers and electric-power-generating and cooling equipment.

Consumer spending, the economy’s main engine, rose at a 1.6% pace in Q1, less than the 1.9% pace in Q4 of last year. Consumer spending picked up in March, although mainly because of higher gas prices. The University of Michigan’s consumer-sentiment index hit a record low of 49.8 in April due to Iran-war anxiety, well below expectations and down from 53.3 in March.

Inflation accelerated in March as the conflict drove up gas prices. The core Personal Consumption Expenditures price index (which excludes food and energy), the Federal Reserves' (the Fed) preferred inflation gauge, grew a seasonally adjusted 0.3% for the month, pushing the 12-month inflation rate to 3.2%. When groceries and energy are included, the gain was 0.7% in March, the largest since June 2022, and followed a 0.4% rise in February, according to the Commerce Department's Bureau of Economic Analysis. At month-end the Fed held its benchmark funds rate at 3.50%-3.75%.

U.S. nonfarm payrolls rose by a seasonally adjusted 178,000 in March, according to the Bureau of Labor Statistics, with health care a major driver of the gains. The increase marked a welcome reversal from February’s 133,000 decline and came in well above expectations. The unemployment rate dipped slightly to 4.3%, however, largely due to a drop in the size of the U.S. labour force on the heels of the immigration crackdown. Wages went up less than expected, with average hourly earnings up just 0.2% in March and 3.5% from a year earlier, the lowest annual increase since May 2021.

Q1 corporate profits reported by the end of April were robust. The blended net profit margin for the S&P 500 was 13.4%, although that data will be confirmed as final in coming months. If 13.4% holds, it will be the highest net profit margin reported by the index since at least 2009. The current record (going back to 2009) is 13.2%, which occurred in Q4 of 2025.

In Canada, Statistics Canada reported that February GDP grew 0.2%, led by a 1.8% expansion in the manufacturing sector, its fastest pace in more than three years and a welcome result in the face of ongoing trade pressures. It was the fourth month in a row of economic growth but a preliminary estimate for March suggests GDP was unchanged. If that holds, it will put Q1 at an annualized growth rate of 1.7%, better than the Bank of Canada’s expectations for 1.5%.

The inflation rate rose to 2.4%, annualized, in March, according to Statistics Canada, as fuel prices jumped higher. March's 21.2% monthly spike in the price of gas was the largest on record. But if the price of gas was stripped out the rate was 2.2%. Retail sales rose 0.7% in February, month-over-month, indicating consumer resilience, and the advance estimate for March suggests some carry-through. At the end of April the Bank of Canada maintained its policy interest rate at 2.25%.

Employment gains were a slim 14,100 in March and the unemployment rate held at 6.7%. Job gains were all in part-time employment, while full-time headcount slid for a second month, pointing to slack momentum. Average hourly wages for permanent employees rose 5.1%, year-over-year.

The housing market continued to slow in March, with existing home sales edging down -0.1%, month-over-month. Sales activity remained well below historical norms at roughly 17% under the ten-year average. New listings were nearly 5% lower than a year earlier and house prices fell for a fourteenth consecutive month.

In the UK, March inflation rose to 3.3%, year-over-year, largely due to higher fuel costs linked to the Middle East conflict. Services inflation ticked up but core goods inflation surprised to the downside, reflecting soft demand. The labour market remained soft and wage growth eased prior to the war. At month-end the Bank of England held its main interest rate at 3.75%, as expected, but expressed concerns about the potential pass-through impact of energy inflation on the wider economy.

In the eurozone March inflation rose to 2.5%, annualized, primarily on higher energy costs. Core inflation edged lower, suggesting limited pass through into underlying price pressures so far. The European Central Bank also left interest rates unchanged at the end of April and signalled its rising concerns about energy and inflation.

In China, March inflation showed producer prices rising 0.5% from a year earlier, ending more than three years of factory-gate deflation as higher energy costs fed through, while consumer inflation eased to 1.0%, annualized.

What can we expect now?

The global economy cannot withstand the closure of the Strait of Hormuz lasting for a prolonged period. Nor can Iran’s already battered economy, so it would seem an agreement to reopen it would benefit all sides. This will be a topic investors will follow closely in May. For the moment, North American equity investors capped April with an impressive, final trading day rally. That optimism can be seen in part as acknowledging a cessation of hostilities, strong corporate performance in Q1, and the major, ongoing contributions to U.S. GDP of AI investments by tech giants. These undeniably positive factors should not be ignored. Alternatively, it may be overly discounting the impact of higher energy costs going forward for major sectors of the economy, including commercial transport and aviation, and the knock-on effects of that on downstream businesses, consumers as well as the future direction of interest rates.

In this environment it is always a good idea to review your asset allocation to ensure it continues to align with your overall financial plan, goals and evolving personal circumstances. We would welcome the opportunity to do so with you.

Sincerely,

Glenn McClelland

 

Note: 

All index performance is in Canadian dollars. 

Important Disclaimers:
The information in this letter is derived from various sources, including CI Global Asset Management, CRA, Bloomberg, National Post, Globe and Mail, Wall Street Journal, Bloomberg, Reuters, Investment Executive, Advisor.ca, MarketWatch, Toronto Sun, The Guardian, MSN.ca and Statistics Canada at various dates. This material is provided for general information and is subject to change without notice. Before acting on any of the above, please contact me for individual financial advice based on your personal circumstances. Certain statements contained in this communication are based in whole or in part on information provided by third parties and CI Global Asset Management has taken reasonable steps to ensure their accuracy. Market conditions may change which may impact the information contained in this document.