April 27, 2026

“Damn the torpedoes, full speed ahead!’
Admiral David Farragut

It seems this is the only way to describe this market. But first the numbers. Last week the S&P 500 added.80% and the Dow Jones Industrial Average fell slightly by the end of the week off .39%, the Nasdaq led up 1.63%. Internationally, not so good, the FTSE 100 surrendered 2.71% and the MSCI-EAFE lost 2.4%. The 2-Year Treasury paid 3.785% and the 10-Year yield was 4.306%

There’s optimism on Wall Street that military operations in the Persian Gulf may be winding down, but oil markets remain on edge.  Investors are ready to move on from the Iran war as it approaches a ninth week, with U.S.-Iran talks over the weekend and military operations in the Persian Gulf potentially winding down. The rally in stocks comes as investors focus on a renewed rally in tech shares and megacap tech earnings on deck next week, instead of roughly $100-a-barrel global oil prices, lost Middle East crude production, and the lack of tanker traffic coming out of the Strait of Hormuz. The U.S. stock market closed mostly higher last Friday, with a rally in technology stocks driving the S&P 500 and Nasdaq Composite to new all-time highs as each index booked weekly gains. The S&P 500 and Nasdaq each scored a fourth straight week of gains, continuing a strong April rebound from March losses that had been sparked by the Iran conflict. But against the backdrop of still high oil prices amid ongoing Middle East tensions, the Dow saw a weekly loss.

Inflation?  We anticipate core PCE inflation to finish 2026 in a range of 2.5% to 3.0%, with current tracking data suggesting it could be near the top end of that range. The energy shock from the Iran conflict has created both direct and indirect inflationary pressures that will persist even as oil prices retreat from recent peaks. If the administration is correct about the end of the war, look for the drop in oil prices to “surprise the pundits”. New York Fed President Williams noted that while headline inflation will rise due to energy costs, his outlook for underlying price pressures remains “largely unchanged.” (Meaning he does not want to stick his neck out too far on what will happen in the next quarter or two.)

As you can guess, looking ahead the path forward depends critically on whether the ceasefire holds and how quickly the Strait of Hormuz reopens to normal commercial traffic. Even under optimistic scenarios, refineries face near-term feedstock shortages, and the inflationary impulse from higher energy costs will persist for quarters. The Fed is facing a stark paradox as the end of the war removes the most compelling argument for rate cuts and prolonged conflict raises the recession risk, while leaving inflation pressures largely intact. This asymmetry narrows the path to easing policy (remember we will have a new Federal Reserve Chairman in May) which raises the prospect of an extended hold, even as growth momentum slows. Translation? Nobody really knows how this will end but everyone knows the midterms are critical to the President’s agenda and I am more than confident he does have a plan and strategy to allow a favorable political environment by the summer. The only question is will the Republican party screw it up?

As we close April, looking at earnings, US corporate earnings are performing strongly in 2026, with Q1 marking the sixth straight quarter of double-digit growth for the S&P 500. The Q1 2026 Earnings Season (ongoing as of late April), with the expected/blended growth analysts project 13.2% year-over-year (YoY) EPS growth for the S&P 500, with some updates showing blended rates (mix of reported and estimated) climbing to 15.1%. This would be the highest revenue growth since Q3 2022. Strong results so far 84% of reporting companies (about 28% of the S&P 500) have beaten EPS estimates (above 5-year average of 78%), with earnings 12.3% above estimates. Revenue beats are also solid at 81%. The leaders have been Information Technology (projected 45% growth, driven by semis/AI), Materials, Financials (15%), and Industrials. The laggards have been Energy (flat/negative), Health Care, and Communication Services may see contractions. Final word on earnings, Early reports from banks (e.g., Goldman Sachs, JPMorgan) and chipmakers (e.g., TSMC) have been robust, with positive surprises in investment banking, trading, and AI-related demand.

All in all, pretty good news.

The housing market and Mortgage rates, any good news? In a word, No. Higher rates (6.2-6.5%) continue to suppress sales and keep the market cooler than buyers would like, but improving supply is giving buyers more negotiating power and options than in recent years. Spring 2026 is more competitive than 2021-2023 but still challenging for affordability. Regional differences are big (e.g., stronger in South/Sun Belt).

Without the financial April showers, can we expect May flowers? Our bet is we will, due to good earnings, the war winding down and expected significant drop in oil prices hence a drop in inflation, we shall see.

Mike