Market Recap* – May, 2026

1. What happened in the markets?

Canadian equities posted a solid gain of 2.5% for the month, supported by improving investor sentiment early in the month as geopolitical concerns showed some signs of easing. Materials was among the top-performing sectors, benefiting from strength in commodity prices. As the month progressed, market sentiment turned more cautious, with ongoing uncertainty around U.S.–Iran negotiations and the outlook for the Strait of Hormuz limiting further upside. On the domestic front, Canadian employment data pointed to continued softness in the labor market, reinforcing expectations that the Bank of Canada would remain on hold at its June policy decision.

U.S. stocks had a strong month, with the S&P 500 posting a 5.3% return in May and a ninth consecutive weekly gain by month end. Corporate earnings for the first quarter came in well ahead of expectations, with technology companies leading the way. The solid earnings backdrop helped markets push higher even as inflation concerns resurfaced late in the month. U.S. inflation figures released at the end of May showed prices rising at the fastest pace in nearly three years, briefly rattling markets before stocks recovered to close the month on a positive note.

Canadian bond prices edged higher by 1.4% over the month. While energy-driven inflation pushed headline prices higher, underlying inflation outside of energy showed signs of easing, reducing the urgency for the Bank of Canada to raise interest rates. Consequently, the short-term rate environment remained supportive of bond prices. Fixed income provided a modest but steady contribution to portfolios during the month.

The money market holding was essentially unchanged over the month, continuing to offer stable and predictable returns. Short-term investments delivered a calm and reliable return throughout a month that saw considerable volatility in other asset classes.

The Canadian dollar weakened against the U.S. dollar over the month. The loonie faced pressure from persistent geopolitical uncertainty tied to the Middle East conflict, which continued to drive demand for the U.S. dollar as a safe haven. While elevated oil prices and Canada’s role as a major energy exporter provided some support, the combination of a cautious Bank of Canada and ongoing uncertainty kept the Canadian dollar on the back foot through most of May.

2. What does it mean for Embark Funds?

Asset class	Change	Impact on cohorts
Canadian Equities	↑	Favorable for younger cohorts with greater equity exposure, as Canadian stocks advanced over the month, supported by improving sentiment and strong performance in the technology sector.
U.S. Equities	↑	Positive for younger, growth-oriented cohorts. The S&P 500 posted nine straight weekly gains, supported by strong corporate earnings and resilient economic data.
Bonds	↑	Positive for older and more conservative cohorts. Bond prices edged higher as underlying inflation outside of energy eased, reducing near-term rate hike concerns.
Money Market	↑	Continued to support older cohorts and capital-preservation strategies. Short-term returns remained stable and predictable throughout the month.
Canadian Dollar	↓ CAD	A modest positive for cohorts with foreign asset exposure. The weaker Canadian dollar increased the translated value of U.S. and other foreign holdings when converted back to Canadian dollars.