Market Outlook - April 2026

April reinforced a point that often gets lost in headline season. Markets are ultimately an earnings driven discounting mechanism, and this month was a reminder that when earnings are resilient, price action tends to follow, even if the news cycle insists otherwise. That is why several strategists have become incrementally more constructive, including Goldman Sachs, which recently lifted its year-end target for the S&P 500 to 7,600, leaning on a thesis of continued earnings growth and AI led investment as a material contributor to profits. Along the same lines, the most recent reporting from large cap U.S. leaders has been broadly supportive, keeping the earnings backdrop intact despite ongoing uncertainty. Monetary policy remains a wildcard, but the central bank held rates steady again in late April, leaving policy restrictive but stable at 3.5 to 3.75 percent, and closing what was widely reported as the final meeting under the outgoing chair. Market consensus continues to expect a more dovish tilt as leadership transitions, though the path to rate cuts may be slowed if energy driven inflation remains sticky. The more important story, in our view, is that fiscal and investment momentum remain powerful offsets. In the United States, policy and private capital are working in the same direction, with large deficits still providing demand support, and the Congressional Budget Office projecting a roughly $1.9 trillion federal deficit in fiscal 2026, about 5.8 percent of GDP, which is meaningfully expansionary by historical standards. In parallel, the UCLA Anderson Forecast highlights the scale of AI infrastructure spending, projecting roughly $660 billion of AI related capital expenditures in 2026, an impulse that behaves like a growth accelerant even in a higher rate world. In Canada, the creation of the Canada Strong Fund introduces a potentially important long-term tailwind for domestic capital formation, with an initial federal endowment of $25 billion and an explicit mandate to invest alongside private capital in areas where Canada has strategic advantage, including energy, critical minerals, agriculture, and infrastructure. Put simply, while geopolitical risks continue to command attention, the underlying investment and earnings engine is still running. That does not eliminate the energy shortage risk, but it helps explain why markets have been willing to look through the noise, and why we remain constructive on forward returns, provided we stay disciplined on valuation, liquidity, and the balance between opportunity and resilience.

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