April 2026 Market Commentary

May 12, 2026

• 1Q26 GDP accelerated to 2.0%.
• Long-term peace plans to end the U.S./Iran war remain elusive.
• Kevin Warsh is on track to be confirmed as the next Chair of the U.S. Federal Reserve.
• April returns: S&P 500 +10.4%; Bloomberg U.S. Aggregate Bond Index +0.1%.

After a bruising March in which fighting between the US and Iran triggered a global energy supply shock, reignited inflation concerns, and precipitated significant financial market volatility, April offered a reprieve for investors. A ceasefire announced near the start of the month sparked a strong market rebound, propelling the S&P 500 to new record highs. Though the ceasefire helped assuage market concerns and end overt fighting between the two sides, a lasting peace remains elusive, leaving tensions elevated. Beyond events in the Middle East, Senate confirmation hearings for the next Fed Chair and first quarter earnings season vied for investor attention.

Equity markets staged a strong recovery in April following the announcement of a two-week ceasefire between the US and Iran. Though the agreement ended the overt fighting between the two sides, it did not resolve the issue of control over the Strait of Hormuz, effectively leaving it closed. In response to Iran’s unwillingness to allow vessels to transit the Strait, the US implemented a naval blockade of Iranian ports. The collective actions amounted to a game of economic chicken, with the US seeking to bring Iran to the negotiating table by severely restricting its economy, while Iran sought to end the US blockade by restricting global energy supplies, thereby keeping prices elevated and maintaining global pressure on the US to reach a satisfactory agreement with Iran allowing for the resumption of shipping through the Strait of Hormuz.

An indefinite extension of the ceasefire towards month end helped push equity markets higher but did not address the stalemate over the Strait of Hormuz, leaving shipping at a virtual standstill. As a result, global oil prices ended April at the same elevated levels at which they began the month. Currently, the two sides remain at loggerheads, despite periodic headlines suggesting efforts to secure a permanent peace agreement. In the meantime, global energy prices remain elevated pressuring economic activity in a myriad of ways.

In the US, the average gallon of unleaded gasoline ended April at $4.39, up from $2.98 at the end of February and $4.06 at the end of March, marking the highest level since 2022. Higher jet fuel prices contributed to the recent demise of Spirit airlines and the loss of 17K jobs. In Europe, airlines have cut numerous flights in response to higher jet fuel prices, including Lufthansa which announced the cancellation of 20K flights from it schedule through the fall.

The conflict in the Middle East has also led to higher fertilizer prices, due in part to constrained supply passing through the Strait of Hormuz as well as higher prices for natural gas, a feedstock in the production of certain fertilizers. Higher fertilizer prices have coincided with planting season in the northern hemisphere forcing producers to make difficult decisions. With fertilizer prices having increased by as much as 40% in many areas, producers must decide whether to purchase and apply a typical amount of fertilizer and risk lower profits, or reduce their usage and risk lower yields, which could also impact profits.

The Federal Reserve received considerable attention in April, first as Kevin Warsh, President Trump’s nominee to succeed Jay Powell as Fed Chair, testified before Congress, and again following the Fed’s Federal Open Market Committee (FOMC) meeting at month end. Warsh’s nomination initially faced resistance from Republican Senator and Senate Banking Committee member Thom Tillis, who stated he would not support Warsh’s nomination until the Department of Justice (DOJ) dropped its case against Powell over renovations to the Fed’s headquarters, something Tillis viewed as a direct assault on Fed independence. Following Warsh’s confirmation hearing before the Senate Banking Committee, Tillis reiterated his stance, effectively preventing Warsh’s nomination from proceeding to the Senate for a full vote. Days later, the DOJ dropped its case against Powell. Tillis subsequently said he would vote to confirm Warsh, paving the way for a full Senate vote, likely in mid-May, at which time Warsh is expected to be confirmed.

At its April FOMC meeting, the Fed left rates unchanged, as expected. Interestingly, three members who supported the action objected to the official statement’s easing bias suggesting the possibility of further rate cuts in 2026. At his post-meeting press conference, Chair Powell addressed speculation about his future saying he intends to remain on the Board of Governors “for a period of time, to be determined” following the end of his term as Fed Chair. Powell later said he worries the political attacks on the Fed are “battering this institution and putting at risk the things that really matter to the public,” namely the ability to conduct monetary policy free from political influence. Should he choose to do so, Powell could remain on the Board of Governors until the end of his term in January 2028.

US economic activity (GDP) expanded at a 2.0% annualized pace in the first quarter, up from the 0.5% pace recorded in 4Q25. Business spending was the dominant driver, up 8.7%, contributing 1.5% to the headline growth figure. Though no one specific line captures business spending on AI, an extrapolation of the data suggests it accounted for at least half of the 2.0% headline growth. One notable development was a 21.4% surge in imports, which may have been spurred by companies taking advantage of the Supreme Court’s February ruling which invalidated a large portion of President Trump’s April 2025 tariffs. With expectations that Trump will replace the struck-down tariffs later in the year using a different set of laws, companies appear to have pulled forward orders to take advantage of the temporary reduction in tariffs, as evidenced by a noticeable jump in inventories. Consumer spending during the quarter was more modest, increasing 1.6%, the slowest pace in a year.

March inflation figures reported in April reflected the initial impact of higher energy prices. Headline consumer inflation (CPI) jumped 0.9% in March, the largest monthly increase in nearly four years. The increase was driven by a 10.5% increase in energy prices, including a 21.2% increase in gasoline prices, the largest monthly increase on record dating back to 1967. Compared to a year ago, headline CPI rose 3.3%, the fastest pace since May 2024. Core CPI, excluding food and energy prices, rose a more modest 0.2% for the month and 2.6% from a year ago, suggesting the impact of higher energy prices has been relatively contained thus far. However, the longer energy prices remain elevated, the greater the likelihood they seep into the broader economy, increasing prices for a wide array of goods and services.

April employment data showed mixed signs of improvement as nonfarm payrolls added 115K jobs, marking the second consecutive month in which the economy added 100K+ jobs, following a net loss of 112K jobs during the preceding five months. Unemployment remained unchanged at 4.3%, aided largely by a decline in labor force participation rather than stronger labor demand. Wage growth was modest, with average hourly earnings rising just 0.2% month-over-month and 3.6% year-over-year, tied with July 2024 for the second slowest annual pace since 2021. Job openings in March were effectively unchanged at 6.68M, hovering around their post-pandemic lows, apart from December 2025. The quits rate remained subdued at 1.9%, underscoring reduced worker confidence and limited job mobility.

First quarter earnings season once again highlighted the overall health of corporate America. At the end of April, 63% of S&P 500 companies had reported earnings with 84% beating their consensus estimate. According to industry group FactSet, consolidated earnings growth for the quarter is expected to be 27.1%, which if achieved, would be the fastest pace of growth since 4Q21. The Mag 7 stocks continue to have an outsized effect on consolidated earnings, with Mag 7 earnings growth expected to be 61%. Excluding the Mag 7, earnings growth for the rest of the S&P 500 is expected to be a still healthy 16%. First quarter 2026 will mark the 6th consecutive quarter of double-digit consolidated earnings growth for the S&P 500.

Improving sentiment surrounding the Middle East and strong earnings growth helped propel markets higher in April. Both large caps (S&P 500) and small caps (Russell 2000) enjoyed their best month since November 2020, up 10.4% and 12.2%, respectively. International markets also enjoyed a strong rebound, aided by improved sentiment and a decline in natural gas prices. Developed markets (MSCI EAFE) rose 7.1%, while emerging markets (MSCI EM) rose 14.5%.

Bond markets, as measured by the Bloomberg US Aggregate Bond index, the broadest measure of the US bond market, gained 0.1% in April. However, the modest point-to-point gain belied significant volatility experienced during the month. Like equity markets, movements in the bonds markets were closely linked to developments in the Middle East as well as energy prices and their potential impact on inflation.

US Treasury yields declined during the first half of the month, with the 10-Year falling to a low of 4.22%, before rebounding in the second half of the month, to end the month virtually unchanged. The initial decline was driven by improving sentiment surrounding events in the Middle East including fleeting news on April 17 that the Strait of Hormuz had been reopened. Yields subsequently rebounded as the Strait remained closed, global energy prices remained elevated, concerns about higher inflation remained exacerbated, and predictions for 2026 rate cuts dissipated. Quality spreads largely tightened over the month even as inflationary pressures and uncertainty steepened the curve leaving yield pickup in duration not quality exposure.

Municipal bonds slightly outperformed Treasuries in April even as supply pressures and historical April data made many investors skeptical about their resilience. The yield curve continued to steepen and ratios to Treasuries on the short end tightened, making duration risk/return a key part of market pricing.

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