Global Asset Allocation Team Market Update – April 2026
The first quarter ended on a subdued note. Investor sentiment retreated as the US-Iran conflict fanned the flames of geopolitical turmoil across the globe and sparked wild swings across financial markets. There was little place to hide in what was a tumultuous market environment, with both stock and bond markets recording losses in March. However, there was a dramatic comeback at month-end on speculation that the US and Iran may be moving towards a resolution – which triggered a rush to risky assets. Still, for that bounce to be sustained, investors will need to see more clarity on the path to de-escalation – and particularly as it pertains to the reopening of the Strait of Hormuz.
Global equity markets retreated in March, with the MSCI All Country World falling -7.4% as investors grew more nervous about a protracted war in the Middle East that risks crippling the global economy. The S&P 500 (-5.1%) posted its worst monthly loss in a year. The S&P/TSX (-4.6%) also declined. While the heavyweight energy sector (+7.5%) held firm, gold stocks (-17.9%) stumbled lower and weighed on performance. Elsewhere, the MSCI EAFE (-10.7%) closed out its biggest monthly decline since 2022 – while the MSCI gauge of emerging markets stocks (-13.3%) posted its biggest monthly loss in six years.
Fixed income markets failed to play their traditional role as a safe haven and have all but erased their year-to-date gains. Global bond yields pushed broadly higher as major central banks dashed once-widespread hopes for easier monetary policy given the latest spike in oil prices that risks stoking inflation. That prompted a sharp re-pricing, with investors dialing back their expectations for central bank rate cuts this year. Yield curves flattened in a bearish fashion, with the policy-sensitive short-end of the curve rising by more than its longer-dated counterparts. For the month, the Bloomberg US Aggregate Bond Index declined -1.8%, while the FTSE Canada Bond Universe shed -2.0%.
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