LCI Monthly – Markets in April 2026
Markets
Executive Summary
April 2026 delivered one of the most powerful monthly equity rallies of the cycle. The MSCI World gained +9.6% in USD as investors looked through a deteriorating geopolitical backdrop – an open US–Iran confrontation, a partially disrupted Strait of Hormuz and an oil-price spike – and chose instead to focus on a spectacular wave of AI-related capital expenditure, a strong Q1 earnings season and the prospect of an eventual Fed easing cycle.
The dispersion across markets was extreme: South Korea (+33.9% in local currency) and the global IT sector (+19.3% in USD) drove the headlines, while Latin America, Indonesia and the global Energy sector lagged. Fixed-income returns were modest but uniformly positive, with credit and emerging-market debt outperforming sovereigns thanks to spread tightening.
Equity Markets – Regional Performance
1-month returns in local currency
Europe
Europe was a clear second tier relative to North America and Asia. The Eurozone (+6.9%) was led by Italy (+7.9%) and Germany (+6.8%), both of which benefited from cyclical and industrial exposure, with German autos and industrials in particular helped by improving export-earnings expectations.
France (+4.2%) trailed, weighed down by luxury, while Switzerland (+4.1%) was held back by its heavy defensive tilt – Nestlé, Roche and Novartis together account for roughly half of the SMI – which structurally underperforms in a tech- and AI-led cyclical month, with a firmer CHF adding a further drag on multinational exporters. Spain (+5.3%) held up well on the back of strong bank earnings.
The United Kingdom (+2.5%) was the developed-market laggard – its structural tilt to defensives and the surprising weakness in Energy left it with little participation in the AI-driven rally.
North America
The US (+10.5%) delivered its strongest month since 2020, led by the Magnificent Seven and a broad re-rating of semiconductors and AI infrastructure plays. Q1 earnings beat expectations, with the blended growth rate above 13% y/y and IT companies tracking towards roughly 38% earnings growth for the full year.
Canada (+4.4%) lagged the US, hampered by softer commodity exposure outside oil.
Latin America
Latin America was the soft spot. Brazil (-0.4%) and Mexico (-0.4%) both ended in negative territory despite still-attractive valuations (Brazil P/E 10.9, EY 9.2%). Local political uncertainty and currency pressures more than offset the global tailwind. Indonesia (-5.3%) suffered the worst monthly decline in the universe, on a combination of capital outflows from non-AI EMs and weaker commodity exposure.
Asia-Pacific
The standout was South Korea (+33.9%), posting its best month in 28 years. The KOSPI rally was almost entirely an AI memory-chip story: Samsung Electronics and SK Hynix together drove the index, with SK Hynix up around 60% on the month and Samsung up roughly 35%. South Korea's total market capitalisation crossed USD 4 trillion, briefly overtaking the United Kingdom to become the world's eighth-largest equity market.
The same theme propelled India (+9.2%), where IT services and chip-design exposure benefited from the global AI capex surge, and to a lesser extent China (+2.8%), where the rally was held back by ongoing property-sector concerns. Japan (+7.5%) delivered a solid month, helped by yen weakness and a positive read-through from the AI rally to its semiconductor-equipment names. Australia (+2.0%) was muted, held back by its bank- and resources-heavy composition.
Equity Markets – Sector Performance
1-month returns in USD
IT (+19.3%) and Communication Services (+15.4%) dominated, both lifted by AI capex announcements and stronger-than-expected hyperscaler earnings. The Philadelphia Semiconductor Index rose close to 40% on the month, and Intel's Q1 print sent its shares up by more than 23% in a single session – its best day since 1987.
Consumer Cyclicals (+9.5%) and Industrials (+9.0%) rounded out the leadership, supported by improving earnings revisions and resilient consumer data. Financials (+7.3%) benefited from a still-steep yield curve and constructive Q1 bank results. The rest of the market participated only modestly: Materials +4.2%, Utilities +3.2% and Consumer Staples +3.0%.
The two negatives were instructive. Energy (-1.9%) ended the month lower despite the surge in spot oil, as investors took profits after the sector's strong YTD run (+35.4%) and questioned how durable a war-driven price spike could be. Health Care (-0.3%) was the weakest of the defensives, pressured by ongoing US drug-pricing rhetoric and a heavy pipeline of policy headlines.
Valuations across sectors are now stretched: IT trades at 31.6× forward earnings and Consumer Cyclicals at 32.1×, against ~14× for Financials – a reminder that the AI thematic carries both the performance and the valuation risk into the next quarter.
Fixed Income
Bond markets were quietly constructive in April. The asymmetry between sovereign and credit performance was the main feature.
USD Bonds
US Treasuries returned 0.1% on the month as long-end yields drifted higher on the energy-driven inflation impulse, leaving the YTM around 4.3%. Credit fared better: Corporate IG USD +0.4% (YTM 5.2%) and High-Yield USD +1.7% (YTM 6.9%), both helped by spread compression as risk appetite improved.
EUR Bonds
Returns were uniformly positive. Eurozone government bonds +0.3% (YTM 3.2%), EUR Corporate IG +1.0% (YTM 3.6%) and EUR High-Yield +2.0% (YTM 5.3%). The market shrugged off the inflation print and remains comfortable that the ECB will stay on hold.
Emerging Market Debt (USD)
EM debt was the strongest of the three blocks: EM Sovereign +2.0% and EM Corporate +1.6%, with current YTMs of 5.8% and 5.9% respectively. EM debt benefited from a softer USD, the broader risk-on tone and the AI-driven optimism toward Asian issuers.
The takeaway for the asset-allocation discussion is unchanged: in a world where sovereign duration provides only modest carry and is increasingly correlated with energy-driven inflation surprises, credit – and particularly EM and high-yield carry – remains the better-paid leg of fixed income.
Outlook
May begins with risk assets at or near record highs and with implied volatility once again low – a reminder that a great deal of good news is now in the price. The two near-term catalysts to monitor are:
(i) Any de-escalation or escalation in the Middle East and the corresponding move in oil;
(ii) The transition at the Fed, where Kevin Warsh's arrival could shift the balance of the committee toward earlier cuts.
Learn more on LCI Research
Equity Performance of selected Countries
Equity Markets in Local Currency
Equity Performance of Global Sectors
Equity Global Sectors in USD
