Market commentary: Apr 2026
Portfolio performance
Despite the US/Iran war and its negative impact on returns over the last 6 months, annual returns to the end of April 2026 have held up very nicely with strong returns from international equities and infrastructure. However, Australasian share markets continue to struggle. The strength of the US economy and the AI theme are outweighing concerns about the impact of oil prices. Market psychology continues to be optimistic but there are signs of increasing pessimism.
Investment opportunities in Europe*
European Union (EU) countries are responding to threats and pressure from the US by working together more closely. Germany is positioning itself as the powerhouse economy of the EU.
Germany reshaping it’s (and the EU’s) economic foundations. Germany plans to spend between €900 billion and €1 trillion reshaping its economic foundations and boosting its long-term competitiveness. This includes €107 billion on rail, €52 billion on roads, €38 billion on digitisation. The €100 billion climate and transformation fund underscores Germany’s commitment to sustainability and energy transition.
Economy recession. An economic recession can end a bubble. According to the CEOs of the big banks, regional banks, brokerage houses, and big industrial companies in the US the economy is growing solidly – not booming but nowhere near recession. The mood is cautiously optimistic.
EU imports and exports. In response to tariff uncertainty and supply chain vulnerabilities, the EU is pursuing ‘de-risking’ strategies such as ‘onshoring’ (the practice of relocating production back to the EU) and shifting to a new growth model – one that focuses more on trading with each other rather than exporting to non-EU countries.
The EU has an advantage in that what it does export is often highly differentiated and specialised. This gives some protection against US tariffs and demand for products in these categories.
Investment implications. Given the foundations of change, what industry sectors are Capital Group looking at?
Utilities and grid capital expenditure. Electrification and an industrial recovery will drive demand for more electricity.
Construction and infrastructure. Germany’s infrastructure fund is a game changer for contractors, cement producers and equipment producers in the energy value chain. Rail modernisation and housing programs will create sustained demand.
Banking sector. The sector offers strong fundamentals, improving profitability, and compelling valuations versus US peers.
Defence and security. Spending is expected to surge in response to ongoing security threats to energy sources, infrastructure, and supply chains.
Green technologies and heavy industry. Rising carbon prices and policy incentives favour companies investing in carbon capture, hydrogen, and energy efficiency.
While geopolitical risks and execution challenges persist, the policy mix of EU wide initiatives and national programs - anchored by Germany’s spending program - create a robust foundation for growth.
For investors, the implications are clear: sectors in the EU aligned with infrastructure, energy transition, defence, and industrial modernisation offer attractive opportunities over the medium to long term.
* Source: Summary of article written by Matt Reynolds, Investment Director at Capital Group.
Richard Grimes, CERTIFIED FINANCIAL PLANNER (CFPCM), Director and Financial Adviser