Overview
April 2026 delivered the strongest monthly performance for U.S. equities since November 2020. The S&P 500 gained 10.4% and the Nasdaq surged 15.3%, driven by a sharp relief rally following the announcement of a ceasefire between the United States and Iran on April 8. Markets quickly moved away from worst case scenarios surrounding the Strait of Hormuz, despite the fragile nature of the truce and continued oil volatility throughout the month. Equities instead focused on a very strong earnings season and a broad return in risk appetite. Small caps gained more than 10%, developed international markets rose 7.4%, and the TSX also finished higher despite a consolidation phase in Energy following its March rally.
U.S. Market Performance & Policy
Nine of the eleven S&P 500 sectors finished April higher, with growth stocks clearly leading the market. Communication Services gained 18.5% and Information Technology advanced 17.5%, supported by continued artificial intelligence spending and strong earnings from the Magnificent 7. In contrast, Energy declined 3.5% after its major March rally, reflecting profit taking and sector rotation, though it remained the top performing sector year to date at +33.5%. The Federal Reserve held rates steady at 3.50%–3.75%. Jerome Powell’s final meeting showed significant internal division, with an 8–4 vote split, the largest dissent since 1992. Several members challenged the assumption that rate cuts remain the base case, signaling a more hawkish tone. Markets now expect no rate cuts in 2026, with the first reduction pushed toward late 2027.
Nine of the eleven S&P 500 sectors finished April higher, with growth stocks clearly leading the market. Communication Services gained 18.5% and Information Technology advanced 17.5%, supported by continued artificial intelligence spending and strong earnings from the Magnificent 7. In contrast, Energy declined 3.5% after its major March rally, reflecting profit taking and sector rotation, though it remained the top performing sector year to date at +33.5%. The Federal Reserve held rates steady at 3.50%–3.75%. Jerome Powell’s final meeting showed significant internal division, with an 8–4 vote split, the largest dissent since 1992. Several members challenged the assumption that rate cuts remain the base case, signaling a more hawkish tone. Markets now expect no rate cuts in 2026, with the first reduction pushed toward late 2027.
Key U.S. Economic Data
Interest rates remained unchanged at 3.50%–3.75%, while March inflation accelerated to 3.3% year over year, including a monthly increase of 0.90%, the largest since 2021. Core inflation came in at 2.6%. ISM Manufacturing remained stable at 52.7 and ISM Services declined slightly while staying in expansion territory. Unemployment edged down to 4.3%. First quarter earnings significantly exceeded expectations, with more than 80% of S&P 500 companies beating forecasts. Earnings growth reached 27%, led by the Magnificent 7 at +61%, compared to 16.4% for the rest of the index.
Interest rates remained unchanged at 3.50%–3.75%, while March inflation accelerated to 3.3% year over year, including a monthly increase of 0.90%, the largest since 2021. Core inflation came in at 2.6%. ISM Manufacturing remained stable at 52.7 and ISM Services declined slightly while staying in expansion territory. Unemployment edged down to 4.3%. First quarter earnings significantly exceeded expectations, with more than 80% of S&P 500 companies beating forecasts. Earnings growth reached 27%, led by the Magnificent 7 at +61%, compared to 16.4% for the rest of the index.
Oil Markets & Iran Conflict
Oil experienced an extremely volatile month. The announcement of a temporary reopening of the Strait of Hormuz on April 17 caused crude prices to fall more than 10%, before rebounding sharply following renewed military tensions on April 20. Brent crude reached a peak of $126.41 on April 28 before stabilizing near $115. Commercial traffic through the Strait remained far below pre conflict levels, while average U.S. gasoline prices climbed to $4.48 per gallon from $2.98 before the war. Oil therefore ended the month elevated and unstable, with no clear resolution in sight.
Oil experienced an extremely volatile month. The announcement of a temporary reopening of the Strait of Hormuz on April 17 caused crude prices to fall more than 10%, before rebounding sharply following renewed military tensions on April 20. Brent crude reached a peak of $126.41 on April 28 before stabilizing near $115. Commercial traffic through the Strait remained far below pre conflict levels, while average U.S. gasoline prices climbed to $4.48 per gallon from $2.98 before the war. Oil therefore ended the month elevated and unstable, with no clear resolution in sight.
Canadian Market Update
The TSX slightly underperformed in April after outperforming in March, weighed down by Energy consolidation as global capital rotated back toward U.S. technology names. Energy and Materials nevertheless remained the best performing TSX sectors year to date, supported by elevated oil prices and continued strength in gold amid geopolitical uncertainty. The Bank of Canada held its policy rate at 2.25% on April 29 for a fourth consecutive meeting. The Bank highlighted moderate economic growth, energy driven inflation pressures, and a cautious approach toward the risk of persistent inflation. The next rate decision is scheduled for June 10, 2026.
The TSX slightly underperformed in April after outperforming in March, weighed down by Energy consolidation as global capital rotated back toward U.S. technology names. Energy and Materials nevertheless remained the best performing TSX sectors year to date, supported by elevated oil prices and continued strength in gold amid geopolitical uncertainty. The Bank of Canada held its policy rate at 2.25% on April 29 for a fourth consecutive meeting. The Bank highlighted moderate economic growth, energy driven inflation pressures, and a cautious approach toward the risk of persistent inflation. The next rate decision is scheduled for June 10, 2026.
Outlook
April’s rebound remains strong but depends on several fragile assumptions: geopolitical stabilization, a lasting reopening of the Strait of Hormuz, and containment of energy driven inflation. Oil futures remain above $80 for late 2026, maintaining structural inflationary pressure. The Fed’s increasingly hawkish tone, leadership transition, and broader macroeconomic uncertainty continue to raise overall market risk. The environment remains supportive for earnings and artificial intelligence related investment in the short term, though selectivity remains critical. Energy, defence, aerospace, and AI infrastructure remain favored sectors, while caution is still warranted toward consumer discretionary and rate sensitive assets.
April’s rebound remains strong but depends on several fragile assumptions: geopolitical stabilization, a lasting reopening of the Strait of Hormuz, and containment of energy driven inflation. Oil futures remain above $80 for late 2026, maintaining structural inflationary pressure. The Fed’s increasingly hawkish tone, leadership transition, and broader macroeconomic uncertainty continue to raise overall market risk. The environment remains supportive for earnings and artificial intelligence related investment in the short term, though selectivity remains critical. Energy, defence, aerospace, and AI infrastructure remain favored sectors, while caution is still warranted toward consumer discretionary and rate sensitive assets.