May 4, 2026

“It’s good to learn from your mistakes. It’s better to learn from other people’s mistakes.”

Warren Buffett

As The Oracle of Omaha finally retired, turning the reins over to a young 63-year-old Turk named Greg Abel. The market continued its Bullish sentiment, but first, here are the numbers. The S&P 500 added 1.08%, the Dow Jones Industrial Average gained .79%, the Nasdaq led the show up 1.27%. Internationally the FTSE 100 lost a little off .14% and the MSCI-EAFE gained .30%. The 2-Year Treasury paid 3.88% and the 10-Year yield was 4.372%.

So, what happened?  Last week continued the cautious but positive march to higher values. Why? The U.S. economy has shown resilience with 2% first-quarter GDP growth, four months of manufacturing expansion and unemployment claims at a 1969 low. Rising oil prices, up 55% since the Iran war, threaten to push the inflation rate above 4% for the first time since 2023. High tariffs, stubborn inflation, government shutdowns, war with Iran, rising oil prices, nothing in the turbulent past year has poked a hole in a seemingly unsinkable U.S. economy. The latest round of reports on the economy underscores its tenacity and suggest it’s likely to keep expanding. Double-digit single-month gains for the S&P are exceedingly rare — fewer than three-dozen in almost a century. Therefore, April’s gain of over 10% is unusual. It’s the same for the NASDAQ. The index had its best month since 2020, posting a gain of close to +15% in April.

The factors? Start with gross domestic product, the official measure of how fast the U.S. economy is growing. GDP rebounded in the first quarter and grew at a solid 2% annual rate after sputtering at the end of last year. GDP is a backward-looking number, but the report also showed the economy picking up in February and March just as the conflict with Iran erupted. More recent evidence also points to the resilience of the economy. Larry Kudlow economist on Fox business could hardly contain himself with all the “good news” coming last week. American manufacturers grew in April for the fourth month in a row, for instance, to mark the longest streak in four years. Business spending has surged this year and shows no sign of abating as companies pile into the artificial-intelligence boom. Rising investment was the biggest source of economic growth in the first quarter. A recent uptick in hiring, meanwhile, helped to raise consumer confidence in April to a four-month high. Americans told pollsters that jobs were a bit easier to find. Finally, the amount of money people are spending has stayed at sufficient levels to keep the economy expanding. Consumer spending is the main engine of the economy. “Consumers are still spending,” Jerome Powell said this week during his last press conference as chair of the Federal Reserve. “That’s what the banks will tell you. That’s what the credit-card companies will tell you. Right now, we actually don’t see much slowdown yet.”

Speaking of the Federal Reserve, it was no surprise that interest rates are still stuck where they are with no cut in the near term expected. More drama can be expected as Powell is also going to make the new Chairman’s job difficult by choosing to stay on as a member of the Board of Governors (taking away the opportunity for the President to nominate a successor), as the soap opera continues.

How about earnings? Last Friday, first-quarter net profit margins for S&P 500 companies stood at 14.7%, according to a FactSet report that tracks both reported figures and estimates for companies that have yet to post results. If that figure sticks, it would be the highest since FactSet began tracking the metric in 2009. Seven S&P 500 sectors have seen their net profit margins rise. Meanwhile, the per-share profit growth rate for the S&P 500 in the first quarter over the past week jumped to 27.1% from 15%, according to the FactSet report. A 27.1% clip, if it holds through the end of the quarter, would mark the biggest year-over-year gain for the index since the post pandemic reopening sparked a 32% jump in the fourth quarter of 2021. (Sorry for getting into the weeds but it explains a lot.)

In other interesting news, The UAE leaving OPEC might not be a mortal blow for the cartel, but it’s not good. The betting markets think Venezuela will be next. On a related note, the U.S.’s exports of oil and related products have jumped significantly.

Finally, a word on the bond market. The first quarter of 2026 brought many interesting developments for bond investors. Renewed inflation concerns pushed yields higher, reversing early gains and leaving the Bloomberg U.S. Aggregate Bond Index slightly negative for the quarter. At the same time, expectations for Federal Reserve rate cuts shifted meaningfully, with the probability of a cut falling to roughly 37%, down from 72% at the end of 2025. Taken together, these developments have driven a notable move in Treasury yields. The 10-year yield rose as high as 4.44% before ending March at 4.32%, while the 2-year climbed to 4.00% before settling near 3.80%.1 Short-term yields rose faster than long-term yields, flattening the curve modestly, though it remains slightly upward sloping (in the chart below, data points above 0 represent an upward sloping yield curve). So, our gradual move to intermediate bonds has been sound. Well lets see how this week’s world events affect the markets, but it seems investors have seen it all and are decidedly unmoved.

Mike