Clearview Portfolio Consulting April Market Recap
Key Points:
• Stocks rebounded across the globe in April after selling off in March.
• Major equity indices in the US hit all-time highs despite challenges in the Middle East that may continue to weigh on global energy prices.
• Fears of elevated inflation pushed bond yields higher, but credit spreads remained narrow.
Stocks across the globe snapped back in April despite continued geopolitical uncertainties and a naval blockade in the Strait of Hormuz. The S&P500 gained 10.5%, the Dow Jones Industrial Average returned 7.2% while the NASDAQ was up 15.3%. The major indices hit all-time highs as strong earnings from US technology companies had investors looking past the conflict in Iran, which may or may not continue to pressure the global economy. Here in the US, communication services (+18.5%) was the strongest sector performer, followed by technology (17.5%) and consumer discretionary (11.7%). Mega cap names like Google (communication services), Amazon (consumer discretionary) and NVIDIA (technology) moved the market cap weighted indices higher. Small cap stocks rallied after selling off in March. The Russell 2000 gained 12.2% in April as investors eyed attractive valuations and stable economy. International equities also rebounded during the month with developed non-US markets (MSCI EAFE) gaining 7.6% while emerging markets (MSCI EM) surged 14.7%.
Oil prices continue to dominate the headlines as the conflict in Iran pushed levels above $100/bbl. Higher energy prices have led to inflation concerns and lower consumer spending as prices at the pump have remained elevated. Higher tax refunds may offset some of these higher prices for lower income consumers. The Federal Reserve is unlikely to move forward with additional rate cuts in 2026 as new Fed Chair Kevin Warsh takes the helm at a challenging time. The US economy grew 2% in the first quarter as business investment, specifically AI spending, was strong. Consumer spending slowed as higher prices pressure discretionary spending. Government spending also contributed to growth, rebounding from the shutdown in the fourth quarter.
Bonds have been relatively flat for the year as Treasury yields moved higher on inflation worries and fewer Fed rate cuts priced into the market. Fixed income manager Guggenheim Partners expects higher inflation to subside once the oil shocks fade in the second half of this year, potentially allowing the Fed to ease. High yield bonds have been strong this year, suggesting that investors are comfortable with credit conditions and not expecting the US economy to enter a recession. The remainder of the year will likely be choppy with AI employment disruptions weighing on businesses and workers while the situation in Iran has no clear path for a quick resolution. Mid term elections this fall always bring a level of uncertainty that can curb investor appetite for risk.
Sources: Morningstar Direct, Wall Street Journal, JPMorgan, Merrill Lynch, Guggenheim Partners