Economic Overview — April 2026.

April brought a sharp pivot in global markets, with the artificial intelligence trade roaring back to life and lifting global equities to fresh all-time highs. Strong corporate earnings, a powerful rotation back into technology stocks, and a fragile ceasefire in the US-Iran conflict combined to reverse much of March’s sell-off. Emerging markets led the charge, with Taiwan and South Korea posting extraordinary gains on the back of AI-related demand. Closer to home the picture was more measured. South African equities lagged their developed and emerging market peers as local inflationary pressures and a stronger rand tempered returns, while the IMF cut its 2026 growth forecast for the country.

AI takes the wheel again in global equities

Global equity markets were dominated in April by a vigorous rotation back into artificial intelligence stocks following the sharp sell-off in March. The MSCI World Index gained 9.6% in US dollars (6.9% in rands), more than reversing the 6.4% decline of the previous month. Rising oil prices stoked inflationary concerns, but strong corporate earnings and renewed confidence in the AI investment cycle offset much of the turbulence. MSCI World earnings estimates were revised higher from 14.3% to 17.3% over the month, underpinning the rally. The S&P 500 and Nasdaq both hit all-time highs, the Philadelphia Semiconductor Index surged almost 40%, and growth stocks comfortably outperformed value.

The latest “Magnificent 7” earnings season reinforced the theme. Technology leaders delivered stronger-than-expected revenue and profit growth, particularly in cloud, semiconductors and AI infrastructure. Investors rewarded companies that showed clear monetisation of their AI investments. Alphabet and Amazon were the standout winners, recording double-digit stock gains, while Meta and Microsoft lagged on concerns about heavy AI spending. Tesla saw modest gains despite weaker revenue, Apple drew a muted positive response despite solid iPhone and services growth, and Nvidia slipped after announcing a US$4.5 billion China export-control charge.

Earnings breadth has been remarkable. Among the 63% of S&P 500 companies that have reported Q1 2026 results, 84% beat earnings-per-share estimates, well above the five-year average of 78% and the 10-year average of 76%. That is the highest percentage of positive earnings surprises since the second quarter of 2021. In aggregate, companies reported earnings 20.7% above estimates, with nine of the eleven sectors reporting year-on-year earnings growth and seven posting double-digit gains. Communication Services, Information Technology, Consumer Discretionary, and Materials sectors led the way.

Emerging markets surge, led by Taiwan and Korea

Emerging markets were buoyed by further upward revisions to consensus earnings growth, which moved from 34.3% to 49.8% over the month. The MSCI Emerging Markets Index gained a standout 14.7% in US dollars, powered by extraordinary returns in Taiwan (+26.2%) and South Korea (+38.2%), both central nodes in the global AI supply chain. Taiwan’s TSMC and Korea’s SK Hynix were the largest beneficiaries of demand for AI data centre infrastructure, semiconductors and high-bandwidth memory chips. Commodity price strength in Brazil and Indonesia, across metals, minerals and energy, lifted earnings expectations in those markets as well.

China also saw its consensus earnings growth revised sharply higher, from 7.5% to 27.4%, on the back of AI adoption, exports and policy easing, although domestic consumer demand remains uneven. In India, a simplified corporate tax regime and easier rules around cross-border mergers and acquisitions, particularly in strategic tech sectors like AI, quantum computing and semiconductors, are underpinning earnings expectations. Most sectors there now allow 100% foreign ownership under the automatic route, boosting inflows into manufacturing and services. A weaker US dollar and current account surpluses across the EM bloc are strengthening local currencies, providing an additional tailwind to dollar earnings.

A fragile ceasefire and bonds that went nowhere fast

At the time of writing the US-Iran ceasefire was still holding, but only just. Stalled peace talks and continued military clashes weighed on investor sentiment through the month. President Trump rejected Iran’s latest peace proposal as “unacceptable”, while Iran’s military leadership declared there was “no room for retreat”. More than 20 US warships are enforcing a blockade against Iran, redirecting commercial vessels and disabling attempts to bypass sanctions, while Israeli strikes in southern Lebanon have continued. Pakistan has stepped in as a peace broker, but negotiations remain delicate.

Against this backdrop, global bonds delivered pedestrian returns in April. The Bloomberg Capital Global Aggregate Bond Index yielded 1.3% in US dollars (−1.2% in rands), as yields ticked higher from 3.78% to 3.79%, barely budging after the previous month’s 40-basis-point surge. The story is really in what is coming next. The full effect of the oil price shock is only expected to filter into the April inflation prints, which will be released in May. US headline inflation already accelerated from 2.4% to 3.3% in March, while core PCE, the Federal Reserve’s preferred measure, rose from 3.0% to 3.2% — comfortably above the 2% target. Investment grade and high yield credit spreads tightened over the month despite heavy issuance, and emerging market bonds outperformed their developed market counterparts as spreads compressed from 209 basis points to 172.

For your interest

SA’s growth outlook gets a sobering revision

The relative underperformance of the FTSE/JSE All Share Index in April reflects a more subdued growth outlook for South Africa. In April the IMF cut its 2026 growth forecast for the country from 1.4% to 1.0%, well below the 4.3% average estimate for Sub-Saharan Africa. The IMF described the outlook as a “sobering signal” that South Africa is becoming a regional laggard. This contrasts with the more upbeat South African Reserve Bank, which is still projecting 1.4% this year and 1.9% next year.

Positive developments noted by the IMF included the stabilisation of the electricity supply with reduced load shedding, continued progress on structural reforms under Operation Vulindlela, and credible monetary policy from the SARB. The negatives are familiar. Rising inflationary pressure coupled with protectionist trade measures, including US tariffs on imports, is expected to weigh on the automotive and agricultural sectors and push interest rates higher.

As an energy-importing economy, South Africa remains exposed to rising fuel and fertiliser input costs. Headline inflation rose from 3.0% to 3.1% in March, but is expected to climb to around 3.9% in April and closer to 4.5% later in the year before base effects drive it lower through the first half of 2027. The forward rate agreements are now pricing in three rate hikes over the coming year, a sharp reversal from the two cuts that were priced in before the war in Iran. At the time of writing, the market was pricing in four hikes of 25 basis points each. All eyes will be on the May MPC meeting on 28 May, when the SARB’s updated forecasts will reveal whether its baseline has moved from rate cuts to rate hikes.

Market overview

Global overview

Global equities ended sharply higher in April, with the MSCI World Index gaining 9.6% in US dollars (6.9% in rands), reversing March’s 6.4% decline. The S&P 500 rose 10.49% in US dollars to a new all-time high, the Nikkei 225 surged 16.10% in yen terms, and the Euro Stoxx 50 added 6.34% in euros. The MSCI Emerging Markets Index outperformed at 14.73% in US dollars (11.93% in rands), led by extraordinary gains in Taiwan and South Korea.

Global bonds eked out modest gains, with the Bloomberg Capital Global Aggregate Bond Index returning 1.3% in US dollars. Global inflation-linked bonds outperformed nominal bonds at 1.8% in US dollars, while emerging market bonds gained 2.1% in US dollars as spreads compressed. Global listed property was the surprise winner of the broad asset classes, with the FTSE EPRA Nareit Developed Markets Property Index rallying 8.5% in US dollars (5.9% in rands), recovering most of the previous month’s losses.

Local overview

South African equities lagged their global peers in April. The FTSE/JSE All Share Index yielded a pedestrian 1.7% in rands (4.2% in US dollars), only partially clawing back the 10.5% decline of March. Local inflationary pressures and a stronger rand tempered the rally. Resources finished 2.3% lower as a 4.6% drop in precious metals stocks (in rands) outweighed a 6.8% gain in industrial metals on stronger copper and nickel prices. Telecommunications led the sector tables at +7.1%, followed by healthcare at +5.8%, financials at +4.3%, and technology at +4.2%. Consumer staples brought up the rear at +0.1%.

South African bonds outperformed both their developed and emerging market counterparts. The All Bond Index returned 3.3% in rands (5.9% in US dollars), partially recovering March’s 6.8% loss, as yields fell by 38 basis points on a muted pass-through from higher oil prices and a stronger rand. Inflation-linked bonds added 4.3% in rands. The interest rate-sensitive South African listed property sector rallied 5.4% in rands (8.0% in US dollars), with the discount to net asset value narrowing from 21.5% to 20.7%. SA cash returned 0.5% in rands for the month, comfortably outperforming all the foreign asset classes bar global listed property.