Markets give you a lot to react to and not much context. This monthly note is our attempt to provide some of that context. Thank you for reading.
If you’re a client, we sincerely appreciate your business. If not, and you would like to learn more about our firm, please feel free to reach out. You’re also welcome to share this update with others who may find it useful.
April 2026 in Review
“Don’t call it a comeback. I been here for years.”—Mr. Market or LL Cool J
April delivered a rally across nearly every corner of the market, a welcome shift after the volatility in the first quarter. Risk assets led the way, with growth-oriented and economically sensitive names posting gains that would normally take a full quarter or year to accumulate. Of the 19 asset classes we track, 17 finished the month in positive territory.
The risk-on tone is clear in the numbers. The NASDAQ 100 (+15.7%) and Bitcoin (+12.6%) led the rebound, both recovering meaningful ground after rough starts to the year. U.S. stocks rallied, with the S&P 500 (+10.5%) and the broader Russell 3000 (+10.1%) posting double-digit gains. U.S. small-cap stocks (+10.3%) extended what has been a strong year, with year-to-date returns now at 14.3%, the highest among the major U.S. equity benchmarks.
International markets kept pace with domestic equities. Emerging markets stocks (+9.0%) and international developed markets stocks (+7.4%) both posted strong months, with global stocks (+9.5%) finishing up 7.1% year-to-date. A weaker dollar provided some lift, but the underlying performance abroad has been steady on its own.
Real estate (+8.6%) and commodities (+6.6%) added to the gains, with commodities now up 49.1% year-to-date and leading all asset classes.
Bonds played their usual stabilizing role without much drama. High-yield bonds (+1.5%) led fixed income, with municipal bonds (+1.2%), cash (+0.3%), investment-grade corporate bonds (+0.3%), international aggregate bonds (+0.2%), and U.S. aggregate bonds (+0.1%) all posting modest gains.
The two laggards on the month were the U.S. dollar (-1.5%) and gold (-1.5%).
Market Narratives
Earnings Are Doing the Heavy Lifting
The S&P 500 is at all-time highs, which has predictably generated a chorus of commentary about markets being “detached from reality” or “not pricing risk.” I could argue it was plenty real and pricing risk in March. Another more straightforward explanation is that corporate earnings are driving it. Earnings are doing what earnings tend to do when the economy keeps growing: they go up.
S&P 500 next-12-month earnings per share now sit at $336, up 9% since the start of the year. To put that in context, the index itself is up 5.7% year-to-date through April. Said differently, the price action has lagged the earnings revisions. Forward price-to-earnings multiples have actually contracted from 22.2x at year-end to 21.3x today, even as the index has risen. Investors aren’t paying more for each dollar of earnings; they’re paying less.
Breaking down the year-to-date return into its components helps clarify what’s happening. Of the index’s 5.7% gain, roughly 8.7% came from earnings growth, offset by about 3.4% multiple contraction, with dividends adding the rest. That earnings growth itself splits roughly evenly between sales growth and margin expansion. Margins, now at a forward estimate of 15.2%, have continued to expand from already-elevated levels.
The underlying economy supports the earnings picture. First-quarter real GDP grew at a 2.0% annual rate, with final sales to private domestic purchasers, the cleanest read on underlying demand, coming in at 2.5%. Looking forward, the Atlanta Fed’s GDPNow model currently estimates Q2 growth at 3.5%. Business investment grew at its fastest pace in nearly three years, driven by AI-related equipment and software. In the week ending April 25th, initial unemployment claims recently hit their lowest level since 1969.
None of this guarantees the next month or quarter, and there’s a real argument that some of the margin expansion reflects pricing power in an inflationary environment rather than pure productivity gains. But the answer to “Why are stocks at all-time highs?” isn’t a big mystery. Profits are at all-time highs too.
This Year Looks a Lot Like Last Year
Does it feel like déjà vu? The April rebound is striking on its own, but it looks familiar. Stock market performance this year is shaping up almost identically to 2025. Each year started with AI anxieties (DeepSeek last year, software and labor displacement this year), gave way to a major political event (tariffs last year, the Iran war this year), and then produced a sharp rebound off the market low. One month after the recent bottom, the S&P 500 is up 13% off the bottom. One month after last year’s tariff postponement, it had also rallied 13% off the lows.
The pattern goes back further. Looking across the decade, sharp early-year drawdowns followed by robust rebounds have been the rule rather than the exception. The pandemic in 2020 produced a 33.9% drawdown and a 26.2% one-month recovery off the low. The 2023 regional banking crisis was milder but followed the same script, with a 3.4% drawdown and a 6.6% recovery. This year’s 7.8% drawdown and 13.1% recovery fits the same pattern. The 2022 Russia-Ukraine episode is the outlier, where a recovery attempt got cut short by an aggressive Federal Reserve hiking interest rates.
One nuance worth noting between 2026 and 2025, while growth sectors led the rebound off the low, the year-to-date leaderboard tells a different story. Value has edged out growth in the count of top 50 S&P 500 performers, and not a single Magnificent 7 name cracks the top 100. The rebound has been broader than the headline indices suggest.
The fundamental backdrop also looks to be stronger than it did at this point last year. S&P 500 earnings growth is now projected at 18.7% for 2026, double the 9.3% expected at the same point in 2025. The IPO pipeline is healthy, and M&A activity is strong.
Markets dislike uncertainty, but they tend to only get derailed by peak uncertainty, which may be behind us. Of course, that doesn’t mean the path forward is a straight line. But the parallels to 2025 are hard to ignore, and the underlying fundamentals are arguably stronger.
A New Fed Chair
Jerome Powell’s term as Federal Reserve chair ends on May 15. Kevin Warsh, who served on the Fed’s Board of Governors from 2006 to 2011, is President Trump’s nominee to replace him. The Senate Banking Committee advanced Warsh’s nomination on April 29, and full Senate confirmation is expected before Powell steps down. If confirmed on schedule, Warsh would preside over his first FOMC meeting in June.
Powell is staying on as a governor rather than leaving the Board entirely. He cited the recently dropped DOJ investigation into him and the Fed’s headquarters renovation as the reason, indicating he wants assurances the matter is “well and truly over” before stepping away. His term as a governor runs through January 2028. He has pledged to keep a low profile and avoid any shadow-chair dynamic, but he retains a vote on the FOMC.
The April meeting previewed what Warsh is walking into. The Fed held the federal funds rate at 3.50% to 3.75%, but the vote split 8-4, the widest dissent in decades. Governor Miran wanted a quarter-point cut. Three others (Kashkari, Logan, and Hammack) supported the hold but pushed to remove the easing bias, arguing the next move is as likely to be a hike as a cut.
What might actually change under Warsh? Near-term policy probably won’t, given above-target inflation, a stable labor market, and a divided committee. But Warsh has signaled meaningful operational changes that don’t require committee or congressional approval: less frequent Fed communication, less reliance on forward guidance and the dot plot, and a smaller regulatory and balance sheet footprint.
It’s also worth keeping the bigger picture in mind. The Warsh-for-Powell swap matters less than people assume because the dominant force in this economic regime is fiscal policy, not monetary. Zero rates and trillions in Quantitative Easing failed to push inflation up to 2% in the 2010s, and aggressive hiking has had a hard time pushing it back down to 2% in the 2020s. The chair sets the tone and shapes communication, but the macro forces driving inflation, growth, and rates are bigger than any one person.
Closing Thoughts
April was a reminder that the worst stretches and the best stretches often sit right next to each other on the calendar. The same markets that absorbed March’s drawdown participated in April’s rebound, with Iran, the Fed, and the other headlines still in the picture. There’s an old saying that money is never made on the front page of the newspaper, and the headlines below from Bespoke Investment Group are a good illustration of why.
That cuts both ways. Just as the dire March headlines didn’t stop the rally, the optimistic April mood doesn’t guarantee what comes next. Bullish sentiment among individual investors jumped sharply in late April, and CNN’s Fear and Greed Index has moved from “Extreme Fear” one month ago to “Greed” territory today. That’s not the extreme yet, but a big swing in a short period.
Looking ahead, there’s a lot to keep an eye on. Inflation is running above target. The Fed is divided and changing leadership. Earnings expectations for 2027 sit 16% above 2026, a high bar to clear. The Iran situation could ease or escalate. Those are the questions that will drive returns from here. None of that means the rally is over. The easy bounce off oversold conditions is behind us, and from here, the path will be driven by how those policy and fundamental questions actually resolve, not a simple snap back from oversold lows.
As always, please reach out if you’d like to talk through how any of this affects your specific situation.
Thank you for reading.
