Month in Review
- Equity markets across the globe rebounded sharply in April, defying expectations of a longer drawdown given the oil shock supply. Corporate earnings remain supportive of stock prices.
- Technology, large cap growth, and small cap stocks led the rebound higher, with the Russell 1000 Growth TR Index rising +11.90% in April. Value stocks largely kept pace, with the Russell 1000 Value TR Index rising +8.16% for the month.
- Small cap stocks rose +12.21% (Russell 2000 TR Index) in April, benefitting from stronger-than-expected economic fundamentals given their higher sensitivity to economic growth.
- Long-term Treasury yields rose during April, with the 30-year Treasury touching 5% towards the end of the month. This kept a lid on core bonds, with the Bloomberg US Aggregate Bond TR Index rising +0.11% in April.
What Powered the Recovery in April?
The S&P 500’s +10.49% total return in April was the second best April for the S&P 500 going back to 1950. This outcome was somewhat surprising to investors given the potential headwinds from roughly 20% of the world’s oil supply being offline. Putting aside the forward-looking nature of financial markets, a key catalyst was the fundamental support that strengthened in March and April. Corporate earnings have defied expectations of a decline and actually saw accelerated growth since the conflict in Iran started.
Historically, in any given year, estimate for corporate earnings decline over time. This year has seen the opposite happen: estimates for 2026 earnings and 2027 earnings for the S&P 500 have increased since the conflict began in late February. As of 4/30/2026, first quarter S&P 500 earnings are on track for 16% growth year/year, the sixth consecutive quarter of double-digit earnings growth. Now the full year 2026 earnings estimates are tracking to low double-digit growth- a key factor supporting the rapid recovery in April.
What’s on Deck for May?
- Kevin Warsh is set to be the next Chairman of the Federal Reserve as Jerome Powell’s term as Chairman ends. Thus far, Powell has indicated he will stay on as a Governor, an unusual outcome relative to recent history.
- Investors will closely watch for resolution with the Iranian conflict. Globally, oil reserves started 2026 at high levels but are being drawn down rapidly as supply of oil remains largely restricted from the region.