Q2 2026 Asset class outlook : U.S., Global & International equities

April 21, 2026

Our sub-advisor MFS Investment Management shares its equity outlook for the second quarter of 2026.

By: MFS Investment Management

As part of our Asset Class Outlook series, our sub-advisor MFS Investment Management (MFS) shares its views and perspectives for the U.S., Global and International equities space for the second quarter of 2026.[1]

United States

The market continued to witness a broadening of leadership beyond mega-cap stocks, with selectivity and sector rotation driving performance, despite a spike in geopolitical tensions and oil prices.

Ahead of the conflict with Iran, the economic and earnings backdrop remained resilient. A pro-growth tax and regulatory environment and the status of the U.S. as a net energy exporter, combined with a less-energy intensive economy, could help the U.S. weather the current geopolitical storm.

Global and International

Through mid-March, global equity markets presented a complex yet promising landscape, with regional and sectoral dynamics shaping performance. Looking ahead, MFS believes the outlook remains favourable, supported by expanding earnings growth and resilient macroeconomic fundamentals. However, the ongoing conflict in Iran presents a challenge that is difficult to assess due to uncertainties regarding its duration.

In Europe, a spike in energy prices due to events in the Middle East prompted a pullback after what had been a solid start to 2026. A rotation away from highly valued U.S. sectors toward European equities trading at more moderate valuations supported prices prior to the conflict, though prices eased in early March as risk appetites waned. Heavy government spending on defence and infrastructure is only likely to intensify further given events in the Middle East. While the European Central Bank is unlikely to ease further any time soon, the lagged effects of its 2025 rate cuts continue to filter into the economy. From a valuation perspective, European shares remain compelling compared to those in the U.S.

Japanese equities have been the strongest performers among developed markets, in the wake of the landslide election of pro-growth Prime Minister Sanae Takaichi in February before easing back after the outbreak of hostilities in the Middle East. Takaichi plans to beef up spending on defence and on strategic industries such as AI and semiconductors while suspending the consumption tax on food and undertaking targeted tax reform. Ongoing structural capital markets reforms focused on improving shareholder returns remain a tailwind for share prices.

[1] Data and views as of March 31, 2026, unless otherwise noted.

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Views expressed are those of MFS Investment Management Canada Limited, sub-advisor to select Sun Life mutual funds for which SLGI Asset Management Inc. acts as portfolio manager.

MFS Investment Management Canada Limited is the sub-advisor to the Sun Life MFS Funds; SLGI Asset Management Inc. is the registered portfolio manager. MFS Investment Management Canada Limited has appointed MFS Institutional Advisors, Inc. to provide additional sub-advisory services.