Economic and Financial Market Update - April 2026

Recent Market News – Potential Easing in Geopolitical Conflict

Easing tensions and a potential end to conflict in Iran has fueled a sharp rebound in equity indices in recent weeks, with the S&P 500 and Nasdaq reaching new all-time-highs, and the Dow Jones Industrial Average approximately 1.5% below its February 2026 all-time-high at the time of writing. Friday, April 17^th marked the 13^th consecutive positive session for the Nasdaq – the longest since 1992 – as growth sectors outpaced value for the third week in a row. Small and mid-cap benchmarks also surpassed their February record highs.¹ Though the Trump administration has indicated that it wishes to end the conflict swiftly, discussions between the U.S. and Iran are ongoing and the outcome of the ceasefire remains uncertain and unpredictable. Iran’s nuclear enrichment program, its regional proxies, and the Strait of Hormuz remain points of contention.²

Despite remaining above pre-conflict levels of $60–$65 per barrel, oil prices declined 26.5% in just ten days on the announcement of the two-week ceasefire from nearly $115/bbl by the market close on April 7^th to under $85/bbl on April 17^th.¹ As we outlined in our March communication, we believe that the U.S. economy and consumer are better insulated from oil shocks than in prior decades, however, even if further negotiations prove successful in resolving the conflict, the damage to infrastructure and disruption to supply chains as a result of the conflict is yet to be fully realized. Current oil prices reflect the possibility of a diplomatic resolution to the conflict rather than a meaningful improvement in short-term supply. Again, as we noted previously, it is not necessarily the duration of the conflict, but the duration of elevated oil prices that matters most to the U.S. consumer and economy. At the time of writing, the ceasefire has been extended indefinitely, and the U.S. blockade of the Strait remains in full effect. We continue to monitor the situation closely as it evolves.

To further contextualize last month's commentary, we examine below how recent volatility in oil markets has affected global gasoline prices in March. In the United States, average prices briefly rose above $4/gal – the highest level since April 2022 – yet remain lower than in most other developed countries due to several factors. As we discussed previously, the United States, as the world’s largest oil and natural gas producer, is energy-independent (a net exporter of energy) and as a result is more insulated from global supply shocks.

Beyond energy independence, much of the price discrepancy between the U.S. and other developed countries is attributable to differences in taxation. According to S&P Global Energy, taxes comprise 50-60% of the retail price of gasoline across Europe. In the U.S., gasoline taxes are primarily used to fund the construction, maintenance, and repair of highway infrastructure. In European countries, these taxes are often used to fund not only transportation infrastructure, but a broader range of government spending as well.³

Corporate Earnings Outlook – Strong Upward Revisions

Typically, earnings estimates for the S&P 500 are downwardly revised throughout the year as additional data becomes available and real results are released. For the last fifteen years, by early April, equity analysts have revised earnings-per-share estimates down by 2% on average. Despite recent geopolitical strife and macroeconomic uncertainty, earnings estimates have been upwardly revised by 4% since the beginning of 2026.

Much of the aggregate upward revisions are attributable to the technology sector, which is expected to account for two-thirds of S&P 500 earnings growth in 2026. Conversely, industrials and consumer sectors have ticked down due to anticipated negative impacts from higher gasoline/oil prices, however, analysts expect that these declines will be more than offset by the direct increase in earnings within the energy sector.⁴

For Q1 2026 with only 10% of companies reporting actual results so far, the blended year-over-year earnings growth rate (combining actual reported results and estimates for companies yet to report) for the S&P 500 is 13.2%, which would mark the sixth consecutive quarter of double-digit y/y earnings growth for the index. In 37 of the past 40 quarters, the actual earnings growth has surpassed estimates by 5.8% on average, implying an actual growth rate for Q1 2026 of 19.0%. The current forecast for earnings growth in subsequent quarters is 20.1%, 22.2%, and 19.9% for Q2 through Q4, respectively. This strength and consistency of corporate earnings continues to provide a fundamental anchor and floor for U.S. equity markets amid ongoing geopolitical uncertainty.⁵

Inflationary Environment – Softer than Expectations

As rising energy costs begin to appear in inflation data, the March Producer Price Index indicates that the impact thus far has been less severe than expected. Producer prices increased +0.5% month-over-month, much lower than expectations of 1.1% m/m and equaling February’s increase. Still, goods prices increased +1.6% due to an +8.5% jump in energy costs, though a -0.3% decline in food prices helped to offset the overall increase. The index for services was unchanged following a 0.3% increase in February. Notably, the core producer price index – a less volatile measure which excludes food and energy categories – ticked up only +0.1% m/m against forecasts of a +0.5% increase, the softest result since August 2025.

On an annualized basis, headline PPI reached 4.0%, its highest since February of 2023, but still softer than expectations of +4.6%. Core PPI increased +3.8% y/y, also softer than expectations of +4.0%, matching February’s result as the highest level since March of last year, also +3.8% annualized.^1,6 Though recent data has been better-than-feared, persistent inflationary pressures continue to complicate the Fed’s monetary policy trajectory. As a result, we do not expect another cut to the Federal Funds Rate before late 2026 – if at all this year – and continue to closely monitor the impact of inflationary trends on the U.S. consumer.

Economic Growth – A Constructive Outlook

Retail sales jumped by 1.7% m/m in March, higher than estimates of 1.4%, recording the strongest growth since January 2023. Though much of the headline increase reflects a 15.5% m/m increase in gasoline receipts, spending grew across nearly all other categories – likely buoyed by larger-than-usual tax refunds – indicating that consumer spending remains resilient despite rising oil prices. Control group retail sales, which exclude volatile categories (food services, autos, gasoline stations, and building materials), increased +0.7% m/m, much stronger than expectations of a +0.2% rise, again suggesting that consumer finances remain healthy.⁷ Growth in control group sales is particularly significant as a key input in the calculation of GDP. We expect the combination of stable labor market conditions, growth in consumer spending, and a rebound in government spending following last year’s shutdown to support economic growth throughout the year.

Our Thoughts

Though the geopolitical situation remains volatile, equity markets have rebounded to new highs and begun to look through the potential impact of a prolonged Iranian conflict due to the resiliency of U.S. corporate profit growth. Following the extension of the ceasefire, oil prices remain elevated relative to pre-conflict levels but have fallen approximately 30% from their March intraday peak, and bond yields have stabilized as fears of a significant inflationary spike have been tempered. Still, the Strait remains under a U.S. blockade and U.S. forces have intercepted tankers carrying Iranian oil across the Indian Ocean, while Iran fired on three commercial ships, a marked re-escalation of the conflict. U.S. officials have noted that mines in the strait are more of a nuisance than a threat, and that minesweeping efforts are ongoing. As previously noted, it remains too early to determine the full extent to which the U.S. consumer and economy will be impacted; however, the economic effects thus far have been less severe than anticipated.

Against this backdrop, our near-term outlook remains constructive. Strong reported results and improving earnings projections continue to support equity prices. U.S. households remain on solid footing, supported by meaningful asset appreciation, robust balance sheets, and a stable labor market. Sustained growth in consumer spending continues to drive consistent GDP growth, which the Federal Open Market Committee currently forecasts at 2.3% for 2026, up from 1.7% in 2025. We remain confident in our longer-term outlook, as the onshoring and reshoring of industrial capacity continues to drive meaningful domestic investment and efficiencies, while the buildout of AI infrastructure represents a significant source of productivity growth. Taken in aggregate, these trends – both near-term and long-term – underscore the continued resilience of the U.S. consumer and economy despite geopolitical headwinds.

The initial market decline following the outbreak of the conflict was not severe enough to warrant allocation changes to client portfolios. As volatility persists and should a deeper correction occur, we will opportunistically adjust where appropriate, maintaining our focus on diversification, balance, and quality of fundamentals, while paying special attention to the inflationary impact of the oil shock and its effects on corporate profits, margins, and the health of the U.S. consumer.

As always, we believe patience, discipline, and maintaining a long-term perspective are of critical importance to achieving long-term growth of principal and income. We highly value your relationship and thank you for the trust you place in our team. We look forward to engaging with you throughout the year. Thank you.

Sources

1 FactSet Research Systems, Inc

2 https://www.wsj.com/livecoverage/iran-war-israel-us-strait-hormuz-2026

3 https://www.wsj.com/economy/why-gasoline-is-so-much-cheaper-in-the-u-s-than-overseas-f6bd2309?st=gw7zMn&reflink=desktopwebshare_permalink

4 https://am.jpmorgan.com/us/en/asset-management/adv/insights/market-insights/market-updates/weekly-market-recap/

5 https://advantage.factset.com/hubfs/Website/Resources%20Section/Research%20Desk/Earnings%20Insight/EarningsInsight_041726.pdf

6 https://www.bls.gov/ppi/

7 https://www.census.gov/retail/sales.html

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