Outlook The market has recently been defined by a "wait-and-see" approach as investors weigh resilient corporate earnings against a volatile geopolitical backdrop. In the meantime, corporate America is off to a good start. With 10% of companies reporting 1st quarter earnings so far, the S&P 500 is currently on track for its sixth consecutive quarter of double-digit earnings growth.1 Looking at the bond market, the Treasury market can be characterized as having a resurgent upward-sloping curve amid macro stress. As of April 21, the 2-year sits at 3.81%, the 10-year at 4.32%, and the 30-year at 4.92% - providing a +51 bps spread between the 10-year and 2-year. This positive slope—normally a sign of growth—is currently being driven by what the IMF calls "fiscal dominance." Deficit-financed military spending and persistent energy-driven inflation are pushing long-term yields higher, even as the Fed remains sidelined with arguably little room to cut rates in 2026. . . . U.S. equity markets posted a solid week of gains as investor sentiment improved and market attention shifted back toward fundamentals. Easing oil prices, reduced geopolitical anxiety, and encouraging early-season earnings results helped push major indexes back toward recent highs. The Nasdaq Composite extended its advance for a second consecutive week, underscoring renewed leadership from technology and growth stocks. The S&P 500 also moved higher, supported by broad participation across sectors, while the Dow Jones Industrial Average recorded more modest gains. After a period of heightened volatility earlier this spring, markets appeared more comfortable re-engaging with risk as several near-term headwinds softened. Oil Prices Ease, Geopolitical Fears Diminish One of the most important influences on the market last week was a moderation in crude oil prices. Energy prices had risen sharply in prior weeks amid geopolitical uncertainty, contributing to inflation concerns and market unease. During the week, fears of prolonged supply disruptions eased, allowing oil prices to retreat from recent highs. Lower energy prices tend to ripple positively through the economy by helping consumers, lowering transportation costs for businesses, and reducing inflationary pressure. While geopolitical risks have not disappeared entirely, markets appeared increasingly confident that near-term developments are manageable. Investors have refocused on economic and earnings fundamentals rather than headline risk. Economic Data: Mixed but Stable Fundamentals Incoming economic data during the week was mixed, though largely consistent with an economy that continues to grow at a moderate pace. Consumer sentiment declined notably, reflecting lingering concerns around higher prices and tighter household budgets. Inflation expectations rose in response to earlier energy price increases, and consumers expressed greater caution about personal finances. Markets largely viewed the sentiment data as backward-looking, capturing anxiety from earlier volatility rather than the recent easing in oil prices. Importantly, broader economic fundamentals remain intact. Employment conditions are stable, household balance sheets remain relatively healthy, and consumer spending has continued to show resilience. Investors appeared willing to look past weaker sentiment readings in favor of indicators tied more directly to actual economic activity. Inflation and Federal Reserve Expectations Inflation remained a focal point, but concerns softened as energy prices stabilized. Recent inflation readings had been driven primarily by higher gasoline and transportation costs, and the pullback in oil prices helped reduce fears that inflation would accelerate further. Federal Reserve officials reiterated a patient, data-dependent approach, emphasizing the importance of allowing time for policy to work through the economy. Market expectations continue to favor steady interest rates in the near term, with any future adjustments dependent on how inflation and growth evolve. This stability around monetary policy contributed to improved market confidence during the week. Earnings Season Begins on a Constructive Note The first quarter earnings season began with encouraging signals, particularly from large financial institutions. Early reports showed continued profitability, supported by steady loan growth, healthy capital levels, and strong trading activity. Technology companies also remained in focus. Continued spending on artificial intelligence, automation, and productivity tools reinforced optimism about longer-term growth opportunities. While some companies acknowledged ongoing cost pressures, overall earnings expectations for 2026 remained resilient, helping support equity valuations. Markets Refocus on Fundamentals All in all, with oil prices easing, geopolitical concerns less acute, and earnings season underway, markets demonstrated a renewed ability to focus on fundamentals rather than short-term uncertainty. The combination of improving market performance, a two-week winning streak for the Nasdaq, and steady policy expectations helped reinforce confidence.
[1] https://insight.factset.com/sp-500-earnings-season-preview-q1-2026 | 
