Market and economic commentary
April 2026

From fury to fundamentals

The transition from “Epic Fury” to “Economic Fury” had a soothing effect on global markets. While the whole world was preoccupied with monitoring ship traffic in the Gulf, markets quietly roared upward as investors pushed global indices to new highs. The Compass Portfolios and all ATBIS Pools (the Funds)¹ closed the month in positive territory. Up-to-date performance data for the Funds can be found here.

A month in review

Below are index one-month total returns in Canadian dollar (CAD) terms for April 30, 2026:

The calm between the storms

The Gulf conflict will likely persist in some form for the foreseeable future. However, the recent ceasefire arrangement created a “commercial break,” providing enough stability to restore investor confidence and steer the bull market upward and onward. With the Q1 earnings cycle in full swing—six of the “Mag7”² having already reported—investors have redirected their attention toward fundamentals and the underlying drivers of this rally. 

2026 is shaping up to be a - promising year for market fundamentals. Earnings growth has been increasingly positive, climbing the wall of worry built up by challenging geopolitical narratives. As we tally the Q1 figures, the S&P 500 is on track to deliver its sixth consecutive quarter of double-digit earnings growth, running at 27.8% as of the date this is written, nearly double the expectations set at the start of the quarter. This strength is not just limited to the mega-caps; growth expectations have shifted higher across every sector with the sole exception of energy.

The view from the summit?

Full-year 2026 earnings growth is projected to surpass 20%. If we had to identify a concern, it’s that we suspect we may be approaching an upper limit for growth. We see growth expectations moderate for 2027, with current estimates pegging earnings growth at 15%. To be clear, 15% growth represents a solid year, but it won’t be easy to impress investors following the heights of 2026. 

Beyond the fundamentals, all roads in this market lead back to artificial intelligence (“AI”). It has become clear that much of the global growth we have witnessed lately is built on the back of this. The US economy has seemingly become synonymous with AI technology. Early estimates suggest over 40% of the US GDP growth in 2026 can be attributed to AI developments³. The leading emerging market economies including China, Korea, and Taiwan are seeing a similar AI uptick. With capital expenditures (CapEx) estimated at $600 to $700 billion for AI infrastructure in 2026 alone⁴, investors are naturally asking, “What is the payoff on the other end?”

From asset-light to asset-heavy

Reflecting on the last two decades, investors favoured “asset-light” business models similar to the modern-day Mag7. These businesses were free cashflow (FCF) machines, and investors were happy to push price multiples higher and higher. In recent years, these same entities have transformed into “asset-heavy” businesses, pouring their significant FCF moats into AI infrastructure. Despite the many naysayers, CapEx spending continues to climb, and these mega-cap businesses remain notable favourites through this light-to-heavy transition.

For now, investors have shown remarkable patience. AI adoption is proliferating across all segments of the economy and is only accelerating. A primary reason for this CapEx spend is that the demand for “tokens”—the modern measure of AI compute capacity—far outstrips supply. The global RAM and chip shortages causing us to wait weeks longer for our new laptop to arrive can be entirely attributed to AI. The constraint lies with both the speed of chip buildout—it takes time to commission a new factory line—and in energy infrastructure. 

The “AI Native” generation

While it is likely too early to definitively calculate the “payoff” or “ROI” of these investments, it is clear that the user base for AI is present. Today’s youth—Gen Alpha and Gen Sigma⁵—are growing up as “AI natives.”  In many ways, 2026 feels  like the early 1990s when the Internet first reached the masses. Back then, it was exciting to get your own “www” address via the likes of Geocities. Today, we see that same excitement around every new AI model iteration. 

Whether the preferred model is GPT 5.5, Claude Opus 4.7, Gemini 3.1 Pro (ATB lives here), or Grok 4.3, each update represents significant advancements. We are in the rapid innovation phase of the curve, where leapfrogging is common. It remains unclear which model will be dominant in three or five years, or if a single model will “rule them all.” Will the US still command the AI leadership? Such foundational questions of dominance are what necessitate, or at least rationalizes, this era of nonstop CapEx spend. 

The bottom line

These mega-cap companies continue to generate significant FCF from their core non-AI businesses, with  no signs of a slowdown. However, we are acutely aware that today’s CapEx comes at the expense of dividends and share buybacks, which were highly favoured in the previous cycle. While these companies can comfortably sign the AI cheques today, there is a limit to how long this can continue without a clear payoff. It doesn’t look pretty when the mind writes a cheque the body can’t cash. This is why, even during periods of encouraging market performance, we continue to ask tough questions.

Compass Portfolios Series F1 - Returns net of fees (%)

ATBIS Pools Series F1 - Returns net of fees (%)

¹ Using F series returns
² Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla
³ Reuters
⁴ CNBC, Bloomberg
⁵ Gen Alpha (2010-2025), Gen Sigma (2026 onwards)