Market Update – April 2026
A look back on the first quarter of 2026.
Early 2026 saw markets recalibrating after the advances of the prior year, as investors weighed a broader range of economic and global considerations. Following a relatively stable close to 2025, the first quarter reflected a familiar stage in the market cycle, where gains give way to consolidation and expectations are reassessed. These periods of adjustment are a typical part of long‑term market progress and often play an important role in setting the foundation for future growth.
Canada – Domestic Resilience
Canada’s economic environment remained more resilient than global headlines might suggest during the first quarter, although growth continued at a subdued pace. Inflation showed further signs of easing, and recent data indicated excess supply remained in the economy as businesses and households continued to adapt to higher borrowing costs and slower population growth.
At the same time, elevated household debt levels continued to influence spending and saving decisions, reinforcing a period of financial adjustment rather than a sharp change in underlying economic conditions.
Interest rates remained well above the ultra‑low levels of the early 2020s, but conditions stabilized following earlier rate reductions. In March, the Bank of Canada held its policy interest rate steady, reinforcing a period of pause rather than further easing. For the average Canadian, this meant borrowing costs generally remained unchanged during the quarter, while expectations for near‑term rate relief continued to be pushed further out.
Following the decision, several major Canadian banks and forecasters adjusted their outlooks for 2026, reflecting more conservative expectations for additional rate cuts. Together, these dynamics contributed to a more predictable—but still restrictive—financial environment for households and businesses as they continued to plan around higher debt‑servicing costs.
Canadian financial markets were influenced primarily by global developments during the quarter, particularly geopolitical events and shifts in investor sentiment, rather than signs of domestic economic weakness. While volatility increased at times, market declines were generally more muted than those observed in several international markets. Structural characteristics of Canada’s financial system, along with greater exposure to financial services and natural resources, helped offset some of the sharper pressures experienced elsewhere.
As noted by Fiera Capital, Portfolio Adviser for the Educators Monthly Income Fund and Educators Growth Fund, volatility resurfaced and market performance was more subdued towards the end of the quarter, with both stock and bond markets recording losses in March. Despite the dramatic month-end comeback and continued positive performance at the time of writing in April, driven by hope of a US-Iran resolution, investors will need to see more clarity on the path to de-escalation to sustain that bounce.
Housing conditions also reflected this broader phase of adjustment, with home prices easing in many areas across Ontario during the quarter. Higher borrowing costs and ongoing mortgage renewals continued to influence affordability and buyer behaviour, contributing to a more measured pace of activity and price moderation. For households, this represented a continuation of financial adjustment rather than an abrupt shift in underlying economic conditions.
United States – Policy and Perception
The U.S. economy remained relatively stable during the first quarter, with employment and consumer spending holding up. However, markets became more sensitive to changes in expectations around interest rates, government policy, and global developments. As higher borrowing costs began to cool economic momentum, investor sentiment played a larger role in driving market volatility than weakening fundamentals.
U.S. equity markets experienced heightened volatility during the quarter, driven in large part by heavy concentration in a relatively small group of high‑profile companies and heightened sensitivity to changing expectations around inflation, interest rates, and global events. As sentiment shifted, these dynamics amplified market movements, even as many areas of the economy remained fundamentally stable.
At the index level, this volatility was visible across major U.S. benchmarks. While the S&P 500, Dow Jones Industrial Average, and Nasdaq posted modest declines year‑to‑date, all three remained positive over the past 12 months, reflecting the strength of gains recorded through much of 2025 despite recent pullbacks. Importantly, index movements reflect concentrated, unmanaged benchmarks and do not capture the experience of diversified portfolios built around long‑term objectives.
Market uncertainty was further influenced by the approach of the U.S. midterm elections later in the year. Historically, midterm election cycles have often coincided with periods of elevated volatility, as shifting policy expectations can make investor sentiment more reactive. In this environment, U.S. equity markets have frequently experienced heightened short‑term volatility as investors respond to political uncertainty rather than changes in underlying economic conditions.
At the same time, history suggests that once political uncertainty begins to fade, markets have often responded more positively in the months that follow. In recent outlooks, J.P. Morgan Global Research has emphasized that volatility surrounding election cycles tends to reflect shifts in sentiment rather than a material deterioration in underlying economic fundamentals. While outcomes naturally differ from cycle to cycle, this context helps explain how political uncertainty can influence short‑term market behaviour without necessarily altering longer‑term trajectories.
For Canadian investors with U.S. exposure, the quarter underscored how political and thematic uncertainty can affect market performance even when underlying economic fundamentals remain reasonably intact.
Global Markets – Global Complexity
Global markets in the first quarter were shaped by a resurgence of geopolitical risk, most notably stemming from renewed conflict in the Middle East. These developments introduced significant uncertainty into energy markets, contributing to sharp movements in oil prices and renewed concerns around inflation and global growth.
Unlike more typical periods of market stress, volatility during the quarter was not confined to a single asset class. Equity markets declined, while bond markets also faced pressure as inflation expectations shifted and interest‑rate outlooks adjusted. Historically, gold has often played a more prominent role during periods of heightened market volatility, particularly when inflation concerns rise or confidence in major currencies comes under pressure.
These conditions tested the way different parts of the market typically interact with one another, reminding investors that market stress can affect asset classes differently depending on the source. While this can be uncomfortable in the moment, similar periods have occurred in the past and reflect the complexities of today’s globally connected markets.
Looking Ahead – Through the Cycle
As 2026 progresses, the investment landscape remains complex, but not unfamiliar. Interest rates are closer to more normalized levels, inflation continues to fluctuate, and global growth reflects a mix of challenges and opportunities. Geopolitical risks remain part of the backdrop, yet markets have historically shown an ability to adjust over time as uncertainty becomes better understood.
Periods of increased volatility can test investor confidence, particularly when short‑term market movements feel at odds with long‑term financial goals. While future outcomes are never certain, experience continues to show that short‑term volatility, even though uncomfortable, is a normal part of long‑term investing and does not mean financial plans are off track. Rather, these periods reflect the evolving nature of global markets over time.
For most investors, the path forward is not about responding to short‑term market noise, but about staying aligned with long‑term objectives. Maintaining diversification across asset classes and regions, along with a disciplined, long‑term approach, has historically helped support more consistent outcomes through different stages of the market cycle.
We encourage you to reach out to your team here at Educators Financial Group to review your plan, ask questions, and ensure your investments remain well positioned for the road ahead.
Sources:
Monetary policy report-january 2026. -January 2026 – Bank of Canada. (n.d.). https://www.bankofcanada.ca/publications/mpr/mpr-2026-01-28/
Desjardins, J.-G., & Bangsund, C. (2026a, April). Fiera capital global asset allocation-monthly update: april 2026.
Viktoriyapanahova. (2026, March 16). Quarterly Canadian Outlook: Growth Headwinds offset by stabilizing trade and Jobs. RBC Economics. https://www.rbc.com/en/economics/canadian-analysis/featured-analysis/quarterly-canadian-outlook/quarterly-canadian-outlook-growth-headwinds-offset-by-stabilizing-trade-and-jobs/
Midterm elections are coming in 2026. Here’s what 100 years of data tell us about how stocks may react. (2025, November 28). Morningstar, Inc. https://www.morningstar.com/news/marketwatch/20251128186/midterm-elections-are-coming-in-2026-heres-what-100-years-of-data-tell-us-about-how-stocks-may-react%20[morningstar.com]
Morgan, J. (n.d.). A new presidential race is on – Know the potential investment implications | J.P. Morgan. https://www.jpmorgan.com/insights/markets-and-economy/markets/a-new-presidential-race-is-on-know-the-potential-investment-implications
J.P. Morgan. (2025, December 16). A new high?: Gold price predictions from J.P. Morgan Global Research. A new high? | Gold price predictions from J.P. Morgan Global Research. https://www.jpmorgan.com/insights/global-research/commodities/gold-prices
