Hello everyone,
Up, down, up and then down… It seems to me we're wandering through Canada's Wonderland, from one roller coaster to the next. The S&P 500 regained an astounding 9.35% and the TSX continued its Patagonia mountain climb up another 2.49% (https://ycharts.com/indices/%5ETSX/level#), adding to March's gain of 4.60%. To help break this down, I believe this momentum is based on four essential themes.
First, is the strong Q1 earnings momentum, the primary engine for the S&P 500's push to record highs was a blowout earnings season. A remarkable number of companies are exceeding Wall Street’s earnings projections, marking a level of performance not seen in recent years. So far, one quarter of S&P 500 firms have released their quarterly results, and approximately 83% have surpassed expectations, well above the five-year average of 78%. Revenue growth is also notably strong, with 77% of companies outperforming revenue forecasts, compared to a five-year average of 70%. (https://www.chase.com/personal/investments/learning-and-insights/article/tmt-april-twenty-four-twenty-six) . Technology, Financials, and Materials have seen the highest "beats" against analyst consensus, averaging 12%. Citing this "earnings narrative," HSBC upgraded U.S. stocks to overweight on April 29, noting that U.S. corporate fundamentals remain more resilient than their global counterparts (https://www.reuters.com/business/hsbc-turns-bullish-us-equities-citing-earnings-momentum-2026-04-28/).
Second, both Canadian and U.S. central banks provided some stability by maintaining current interest rates at their late-April meetings. On April 29, the Bank of Canada (BoC) held its key rate at 2.25% for the third time in 2026 (https://www.bankofcanada.ca/2026/04/fad-press-release-2026-04-29/). This decision was supported by March inflation data coming in softer than markets had feared, at 2.4%. The Federal Reserve also held rates steady, between 3.5% and 3.75% on April 29 (https://www.cnbc.com/2026/04/29/fed-interest-rate-decision-april-2026.html). While inflation remains a concern due to the ongoing conflict in Iran, the Fed's decision to pause signaled that there is no rush to hike rates further, despite rising energy costs.
Third, the TSX and S&P 500 both benefited from the continued "AI Supercycle." On the TSX, companies like Celestica (CLS) saw gains of about 2.8% in late April as investors pivoted toward the "picks and shovels" of AI, particularly server hardware and data center infrastructure (https://kalkine.ca/news/technology/why-are-investors-rushing-into-tsxcls-amid-global-tech-rally-april-2026). Investors are also increasingly looking beyond mega-cap semiconductors to mid-cap technology enablers that support global AI deployment, reflecting a trend toward greater diversification within the sector.
Lastly, while the conflict between the U.S., Iran, and Israel initially caused a dip in March, the markets demonstrated "shock desensitization" in April. Elevated oil prices due to Middle East tensions indirectly supported the TSX, which remains heavily weighted toward energy and resource stocks. Although gold and silver mining stocks on the TSX experienced some profit-taking late in the month, the overall structural demand for precious metals provided support for the Materials sector.
In fact, central banks around the world have been actively increasing their gold reserves at the fastest rate in over a year, driven in part by a decline in gold prices that made purchases more attractive. Data from the first quarter indicate that net official-sector gold acquisitions reached 244 tons, reflecting robust demand from several nations. Notably; Poland, Uzbekistan, and China emerged as the largest reported buyers during this period (https://www.bloomberg.com/news/articles/2026-04-29/central-banks-scoop-up-a-load-of-gold-in-bumpy-first-quarter). This surge in central bank gold buying underscores a broader trend of governments seeking to diversify their foreign exchange reserves and hedge against financial market instability, particularly amid ongoing geopolitical tensions and uncertainties in other asset classes.
Looking forward, financial markets in the month of May have historically exhibited mixed performance characteristics, often influenced by broader economic conditions, geopolitical developments, and investor sentiment specific to the period. While some years have seen strong gains, with the S&P 500 advancing by around 6% driven by strength in sectors like technology and healthcare (https://gsbglobal.com/newsroom/market-review-may-2025/), other years have experienced declines. For example, international stocks and commodities have sometimes fallen during May, contributing to an overall average decline in the S&P 500 by nearly 4% in certain periods (https://www.empower.com/the-currency/money/2023-may-market-recap).
Additionally, May can be a month where easing concerns over tariffs or trade tensions have positively influenced global shares, as observed in years where a suspension or relaxation of tariffs between major economies occurred (https://www.schroders.com/en-lu/lu/individual/insights/monthly-markets-review---may-2025/) . Bond yields and currency indices also tend to move in response to interest rate expectations and macroeconomic data released during May, with instances of the dollar index weakening for consecutive months playing a role in shaping market outcomes (https://www.mmbb.org/personal-finance/monthly-market-summary-may-2025).
Overall, while May does not have a definitive seasonal pattern like some other months (e.g., January or December), it remains a period of heightened volatility and sector rotation that can produce either moderate gains or pullbacks depending on prevailing financial and geopolitical factors. And with all the rain lately, you know how the old saying goes: April showers, bring May flowers...hopefully, not wilted flower…ba ha ha....
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