Outlook According to the International Energy Agency (IEA), the energy supply constraints stemming from the conflict with Iran have created the largest energy shock on record—exceeding the severity of the crises seen in 1973, 1979, and 2022 combined.1 In response, consumer sentiment has fallen to near-record lows; despite this, the S&P 500 reached an all-time high by the end of Friday last week.2 In our view, this divergence highlights an important market dynamic: equity valuations are driven primarily by expectations for future corporate profitability, not near-term sentiment or headline risk. Consensus estimates continue to point toward rising corporate earnings through 2027, helping explain the market’s resilience.3 The coming weeks may provide important clarity on whether those expectations remain justified. Investors will receive the first estimate of U.S. economic growth with the Bureau of Economic Analysis’s GDP release, alongside first-quarter earnings results from many of the largest companies in the S&P 500. Together, these data points should offer additional insight into the durability of current earnings trends. . . . U.S. equity markets posted another strong week as geopolitical developments and corporate earnings momentum supported market confidence. The major indices we follow finished the week near or at record levels, demonstrating the market’s resilience amid ongoing global uncertainty. Geopolitical Developments and Energy Markets Markets continued to monitor developments in the Middle East closely. Although the ceasefire has largely held, ongoing disruptions to shipping through the Strait of Hormuz have kept global energy markets on alert. The partial closure of the Strait remains a key risk factor, particularly for oil prices and inflation expectations. That said, investor sentiment improved as markets responded to signals of ceasefire extensions, with a diplomatic resolution still viewed as the most probable outcome. As tensions eased, energy prices retreated sharply, reducing inflationary pressure tied to earlier supply concerns. While this pullback weighed on energy stocks, it provided relief for the broader equity market. Strong Start to Q1 Earnings Season Corporate earnings were another key driver of market strength during the week. Early first-quarter results generally exceeded expectations, reinforcing confidence in corporate profitability despite higher input costs and moderating economic growth. Earnings revisions across sectors have remained balanced. Modest downgrades within energy stocks have been offset by continued strength and upward revisions in technology, resulting in a relatively broad-based and supportive earnings outlook. With a heavy volume of earnings reports scheduled in the coming weeks, investors should gain additional insight into how companies are navigating cost pressures, consumer demand, and global uncertainty. Monetary Policy and Inflation Expectations Investor focus also remained fixed on the Federal Reserve’s policy outlook. While no policy meeting occurred during the week, comments from Fed officials and recent inflation data reinforced the central bank’s “higher for longer” stance, particularly given lingering headline inflation linked to prior energy price spikes. At the same time, stabilizing bond yields and expectations that inflation pressures could ease further if energy prices remain contained helped support equity valuations. Treasury yields declined modestly later in the week, providing a tailwind for growth and technology stocks. Market Performance and Sector Leadership By week’s end, U.S. equity markets extended a multi-week rally, with major indices remaining near record highs. Technology and communication services led gains, while energy lagged amid falling oil prices. Small and mid-cap stocks also participated, reflecting improving market breadth and a broadening risk appetite. Looking Ahead As markets move forward, attention is likely to remain focused on earnings results, upcoming economic data, and developments on the geopolitical front. Overall, market tone remains positive as investors continue to look through short-term disruptions and refocus on underlying fundamentals.
[1] https://www.reuters.com/business/energy/war-iran-is-causing-biggest-energy-crisis-history-iea-says-2026-04-21/ [2] https://www.sca.isr.umich.edu/files/chicsh.pdf [3] https://www.yardeni.com/charts/us-stock-market/stock-market-forward-metrics/sp-500-forward-revenues-earnings-margins | 
