April 2026 Market Recap

Here are the latest market insights from the Goldman Sachs Wealth Management Investment Strategy Group (ISG). 

Geopolitical tensions continued to drive markets in April. Although active hostilities subsided after the US and Iran agreed to a ceasefire, the ongoing closure of the Strait of Hormuz continued to disrupt global oil flows, keeping energy markets on edge. While existing oil inventories have temporarily softened the blow, their finite nature means that if restrictions in the strait remain, supply pressures could intensify.

Here’s a recap of what happened in the market and economy.

The markets: Ceasefire boosted sentiment and risk appetite 

The S&P 500 rallied 10% over the month, while emerging market equities (MSCI EM) jumped 15%. Robust earnings growth, notably within the technology sector, also contributed. By contrast, developed markets outside the US (MSCI EAFE) advanced a more modest 5%, reflecting their greater vulnerability to energy price shocks and lower exposure to technology stocks.

In foreign exchange, the dollar’s performance closely tracked geopolitical developments. After strengthening in March due to its safe-haven appeal amid heightened tensions, the dollar reversed course in April, declining by 1.9% as de-escalation headlines calmed markets.

The initial relief from the ceasefire sparked a rally in rates markets but sustained high commodity prices quickly altered the inflation outlook. As a result, yields climbed across key sovereign markets, with US Treasuries up 5 basis points (as of May 5). Investors grew increasingly wary that persistent energy inflation could lead to tighter monetary conditions.

Central banks generally try to look through supply shocks. In line with this approach, the Federal Reserve kept rates unchanged at the April Federal Open Market Committee (FOMC) meeting. However, the FOMC participants acknowledged ongoing inflation risks and signaled a willingness to adjust policy if necessary. 

The economy: a wary eye on inflation

In the US, first-quarter GDP rose by 2.0% (quarter-over-quarter annualized), which is slightly below expectations.

Growth was broad-based. Consumer spending slowed modestly to 1.6%. Government spending growth rebounded from the government shutdown in the fourth quarter of 2025, although less sharply than expected.

AI-related technology investment remained strong, but this was partly offset by a negative contribution from net trade as imports associated with the AI buildout surged.

ISG maintains their forecast for US GDP growth of 2.1% in 2026. Headline inflation accelerated in March, driven in large part by higher energy prices, while core inflation came in somewhat softer than expected.

ISG expects headline CPI to rise further, but the pass-through into core inflation should remain limited. The supply shock appears to be mostly confined to energy, and the effects of earlier tariffs should gradually fade. In addition, the labor market does not appear to be tight enough to support a wage-price spiral and long-term inflation expectations appear to have risen only modestly so far. The April labor market report showed overall stability, with payroll growth beating expectations but wage pressures still limited.

At its April meeting, the Fed kept interest rates unchanged. The overall tone was modestly hawkish, reflecting continued resilience in the labor market and still-elevated inflation.

Even so, ISG continues to expect the next move to be a rate cut, coming in December, as the effects of tariffs and higher energy prices should fade later in the year.

Looking ahead

ISG is closely monitoring the evolving situation in the Middle East and focusing on President Trump’s visit to China in mid-May.