Markets hit new highs. Is your portfolio prepared for what comes next?

What you need to know

• Markets gain solid ground with stocks leading the way, potentially bringing new life to diversified portfolios following a volatile first quarter.
• While geopolitical risks continue to cloud the outlook, recent widespread gains were supported by the broader backdrop remaining constructive, leading some stock indexes to new highs.
• The government's 2026 Spring Economic Update announced measures aimed to support Canadian economic growth, including the Canada Strong Fund, details of which are still being finalized.
• Rather than trying to time market peaks or chase past performance, we favour managing your portfolio with a forward-looking mindset by setting goal-oriented target allocations, then fine tune your positioning with shorter-term opportunities.
• Consider overweighting stocks—we expect healthy fundamentals to help sustain stock-market momentum in the quarters ahead, and a quality, diversified approach can help manage risks.

Portfolio tip

Consider anchoring portfolio allocations around two complementary time horizons: one defined by your goals to create your longer-term strategy, and one more near-term in nature to capture opportunities with discipline.

Where have we been?

Markets gained solid ground following the year's volatile first quarter. After a March pullback sparked by heightened Middle East tensions and energy supply disruptions, equities staged an impressive rebound in April, generally helping restore momentum to diversified portfolios. Although the conflict has now entered its third month, early signs of de-escalation have helped temper concerns, reinforcing expectations that its economic effects—such as impacts on inflation and growth—will be modest and short-term in nature, even as uncertainty persists.

Beyond geopolitics, in our view, the broader backdrop remained constructive. Resilient economic activity, consumer strength, steady labour markets, and rising corporate profits provided support. Gains were widespread, but stocks meaningfully outperformed bonds as markets struck a more optimistic tone.

Strength across growth and cyclical stocks pointed to rising confidence. After growth-oriented tech stocks, particularly within U.S. markets, lagged early in the year amid concerns over valuations and large capital spending plans, they were among April's leaders. Tech-heavy sectors in the U.S. delivered double-digit returns, helping propel the S&P 500 index to new highs. As optimism improved more broadly, investors rotated away from some commodity-sensitive and traditionally defensive sectors, leaving materials, consumer staples, and utilities to trail the broader market.

Economically sensitive international stocks were also among the strongest performers, notably emerging-market stocks and U.S. small- and mid-cap stocks, with Canadian markets falling behind. Receiving an additional boost from its significant exposure to semiconductors and other tech stocks, emerging-market stocks rose around 12% in April and nearly 45% over the past 12 months.

A year after the tariff-driven volatility of April 2025, solid gains across all stock asset classes have fueled diversified portfolios, with Canadian stocks in the lead.

Bonds edged modestly higher as central banks pressed pause—for now. With the energy shock and its uncertain duration muddying the inflation outlook, policymakers across Canada, the U.S., Europe, the U.K., and Japan opted to hold policy rates steady in April. That said, several inflation-focused central banks (the Fed also weighs labour market health) have become more willing to consider hikes if price pressures persist. As interest rates drifted higher against that backdrop, bonds finished the month little changed.

Details surrounding the Canada Strong Fund proposed in the government's 2026 Spring Economic Update are still being finalized. Within the 2026 Spring Economic Update, the federal government proposed a new sovereign wealth fund—the Canada Strong Fund—among other measures aimed to support economic growth. While details are still limited and plans are unfolding, the fund is expected to support key Canadian industries and offer investment opportunities for retail investors. We will continue to monitor developments and share as more information becomes available. For now, until greater clarity emerges, avoid letting politics or policy proposals influence your long-term strategy.

What do we recommend going forward?

Point your portfolio toward the future and your purpose for investing. Markets are known to be forward looking, and well-structured portfolios may benefit from the same mindset—not by attempting to time market peaks or chase past performance, but by staying disciplined.

We recommend anchoring investments around two complementary horizons: 

• A longer horizon defined by your financial goals. The strategic mix of stocks and bonds should reflect when you plan to use your money. Since bonds tend to be less volatile than stocks, select a mix that helps keep potential portfolio fluctuations aligned with the amount of time you have to recover from market downturns, providing you with comfort when markets become unsettled so you can stay focused on your goals ahead.
• A more near-term horizon to capture opportunities. For investors seeking to enhance return potential, a more tactical lens may prove beneficial. Our opportunistic asset allocation guidance, for example, identifies timely portfolio adjustments using a one- to three-year outlook. Importantly, managing how far your portfolio drifts from long-term targets can help maintain discipline, control risk, and stay aligned with goals, even as markets turn volatile.

Put the near-term outlook to work. After establishing your investment time horizon and your portfolio's strategic mix of stocks and bonds, consider the following for fine-tuning your allocations:

• Overweight stocks. Consider higher stock allocations, trimming bonds. We expect healthy fundamentals—rising corporate profits, positive economic growth, and a resilient consumer backdrop—to help sustain stock market momentum in the quarters ahead, despite geopolitical risks. Technology-related investments and growth are also likely to provide an additional, and potentially broadening, tailwind for global markets.

  To help manage the potential for temporary volatility while capturing a diverse set of opportunities, we favour a stock overweight spread thoughtfully across regions: 

  • Overweight U.S. stocks across market capitalizations. The U.S. economy appears well positioned, supported by recent fiscal measures that help offset higher energy costs, steady labour markets and a Fed that maintains a bias toward rate-cutting. Additionally, U.S. large caps are likely to benefit from their tech exposure, smaller caps offer catch-up potential, particularly as geopolitical risks ease, and a diversified mix with a focus on quality can help manage volatility.
  • Overweight cyclical stocks overseas. We favour developed overseas small and mid caps and emerging markets, especially as tensions in the Middle East show signs of de-escalation. Valuations across cyclical markets remain relatively compelling, even after recent emerging-market outperformance. Emerging markets tend to perform well during Fed rate-cutting cycles and offer valuable exposure to global tech and semiconductor trends.
• Overweight energy, industrials, and materials sectors within Canadian stock allocations. We expect these sectors to benefit from long-term energy demand, additional infrastructure needs, government support for exporting resources, and higher commodity prices, particularly given these sectors' relatively attractive valuations.
• Overweight consumer discretionary and industrials sectors within U.S. stock allocations. With the U.S. economy growing in-line with its long-term trend, a steady consumer backdrop, and the build-out of AI-related infrastructure continuing, these cyclical sectors are positioned to benefit.
• Overweight longer-term maturities within Canadian investment-grade bond allocations. The Bank of Canada has been on hold—keeping its policy rate at 2.25%—though has become increasingly willing to consider rate hikes to help contain inflation. While we expect the central bank to remain paused in the near term, giving time for policymakers to assess the inflation outlook, the 10-year Government of Canada yield has drifted toward the higher end of the 3.0%-3.5% range we expect for most of 2026, supporting an overweight toward longer-term bonds.

We're here for you

Markets have made an impressive comeback, but calling the top of a market can be difficult, even if certain risks feel elevated. Rather than defining success by perfect timing, focus on the decisions guided by what matters most to you. Talk with your financial advisor about structuring your portfolio according to your risk and return objectives to help ensure your financial journey can remain consistently pointed toward your goals.

If you don't have a financial advisor, we invite you to meet with an Edward Jones financial advisor to explore how to piece together your investments with purpose, resilience and a forward-looking, opportunistic mindset.

Strategic portfolio guidance

Defining your strategic investment allocations helps to keep your portfolio aligned with your risk and return objectives, and we recommend taking a diversified approach. Our long-term strategic asset allocation guidance represents our view of balanced diversification for the fixed-income and equity portions of a well-diversified portfolio, based on our outlook for the economy and markets over the next 30 years. The exact weightings (neutral weights) to each asset class will depend on the broad allocation to equity and fixed-income investments that most closely aligns with your comfort with risk and financial goals. 

Diversification does not ensure a profit or protect against loss in a declining market.

Opportunistic portfolio guidance

Our opportunistic portfolio guidance represents our timely investment advice based on current market conditions and a shorter-term outlook. We believe incorporating this guidance into a well-diversified portfolio may enhance your potential for greater returns without taking on unintentional risks, helping to keep your portfolio aligned with your risk and return objectives. We recommend first considering our opportunistic asset allocation guidance to capture opportunities across asset classes. We then recommend considering opportunistic equity sector and Canadian investment-grade bond guidance for more supplemental portfolio positioning, if appropriate.