April 20, 2026

Happy Tax Day! (last Wednesday)

“Oil as a symbol of enduring, guiding light from nature or the divine.”

John Milton

Oh boy was last week was wild due to the aforementioned oil. But first here are the very happy numbers. The S&P 500 rose 4.82%, the Dow Jones Industrial Average advanced 3.99%, and the Nasdaq took off, up 7.11%. Internationally, the FTSE 100 added .62 and the MSCI-EAFE gained 2.10%. The 2-Year Treasury paid 3.706% and the 10-Year yield was 4.248%.

So as of Friday, the Strait of Hormuz is now open, Iran has agreed to all the terms and the President expects this to be wrapped up by early next week. What’s not to like? We are dealing with a very fragmented Iranian government renown for saying one thing and doing another. So, the blockade will continue until the Iran signs the deal and give up the uranium. The effect on the stock market, world markets and the price of oil was immediate. However, Markets will remain highly sensitive to any ceasefire developments or further military moves. The coming week will likely hinge on diplomatic progress and physical oil flow resumption. Overall, with the ceasefire between Israel and Lebanon, the effective blockade destroying what is left of the Iranian economy and the overwhelming military presence (and building) and cooperation from all the gulf countries, the Iranians have few cards, if any, to play.

The week was relatively light on major headline data compared to prior weeks (which included March CPI and employment reports), with a focus on housing, producer prices, and weekly labor indicators. Geopolitical developments in the Middle East continued to influence energy-related sentiment and broader market volatility.

The bad news first, Existing Home Sales (March 2026): Reported at 3.98 million annualized units (down from expectations around 4.05–4.13 million and prior month’s 4.09–4.1 million range). This reflected a -3.6% month-over-month decline, signaling continued softness in the housing market amid higher mortgage rates and economic uncertainty.

Inflation is getting better and will probably continue to improve as oil prices drop. Producer Price Index (PPI) for March 2026: Headline PPI rose 0.5% month-over-month (in line with some forecasts but below stronger prior readings), with year-over-year at 4.0% (up from 3.4%). Core PPI (excluding food and energy) increased 0.2% Month over Month and 3.6% Year over Year. The data showed moderating wholesale inflation pressures overall, though energy components remained a wildcard due to oil price swings. Further, NFIB Small Business Optimism Index (March): Came in at 95.8 (below expectations of 98.8), indicating cautious sentiment among small businesses amid cost pressures and uncertainty.

U.S. Import and Export Price Indexes (March): Released with limited standout surprises; import prices showed modest changes influenced by commodity volatility. Empire State Manufacturing Index (April preliminary): Provided an early read on regional factory activity (specific figures varied by source but generally pointed to modest or slowing expansion).

And the labor market?  Persistent low jobless claims suggested resilience, helping support equity rebounds despite geopolitical risks. Weekly initial jobless claims (week ending April 18 or prior): Remained low and resilient, with figures around 207K–212K (better than or in line with forecasts). The 4-week average also stayed subdued (209K–219K range), reinforcing a still-solid labor market despite broader economic headwinds.

As oil is our topic today, EIA weekly petroleum status report (data for week ending April 10, released mid-week): U.S. commercial crude oil inventories (ex-SPR government emergency stockpile) decreased by 0.9 million barrels to 463.8 million barrels — the first draw in eight weeks and better than the expected build of 2.1 million. This tightening occurred amid export strength and import weakness, even as the Strategic Petroleum Reserve saw further releases (down 4.1 million barrels). Gasoline and distillate stocks also declined. This in an effort for the US to help mitigate the temporary world oil prices. With last Friday’s developments the futures market is already pointing to rapid crude oil price declines in the coming weeks as ships resume transporting oil from the Persian Gulf.

The broader context and implications are, now that we finally got around to talking about the strong earning season, with the financial and key industries showing continued good numbers, but the tech numbers are still coming. Stocks (especially S&P 500 and Nasdaq) rebounded and hit records mid-week, helped by decent earnings beating estimates plus optimism around potential Middle East de-escalation.  Overall, the data painted a picture of a resilient but cautious economy: solid labor conditions, moderating (but still elevated) producer inflation, and softness in interest-rate-sensitive sectors like housing. Markets reacted more to oil/geopolitical swings and ceasefire hopes than to these prints alone.

As we move forward the market looks like it is ready to continue the Bull run all be it with caution, which is why value stocks are still front and center. In world markets, many strategists remain neutral to mildly positive on foreign equities for Q2, viewing them as offering better valuations, higher dividend yields, and more attractive earnings growth potential than expensive U.S. stocks in some cases. However, the oil shock has introduced near-term volatility, higher inflation risks, and growth headwinds—particularly for energy-importing regions. Stronger expected earnings growth abroad (especially in emerging markets), potential US Dollar softening (beneficial for foreign assets), AI/tech supply chain demand in Asia, and attractive valuations relative to the U.S. (e.g., lower forward P/E ratios in Europe, China, and Emerging Markets).

So, relax, you paid your taxes and we can look forward to summer with optimism and God willing, peace.

Mike