Monthly Market Update – April 2026

Markets surged in April despite geopolitical shocks and higher energy prices

April 2026 was a reminder that markets often climb walls of worry. Even as tensions between the U.S. and Iran disrupted shipping through the Strait of Hormuz and pushed oil prices above $110 a barrel, investors largely shrugged off the uncertainty. Instead, they focused on solid economic data, strong earnings, and renewed optimism around artificial intelligence, fueling a broad global rally across stocks while bonds faced pressure from rising yields.

Key Takeaways

• FROM MEGA-CAP TO MANY CAPS 2026 is shaping up to be one of the broadest equity rallies in years, indicating a shift from solely tech-dominated leadership. Energy, Industrials, Materials, Real Estate, and Consumer Staples are the top performing sectors year-to-date and none of them contain the mega-cap Magnificent 7 stocks.
• WHEN FEELINGS LAG THE FACTS A sharp disconnect has emerged between how Americans feel about the economy and how it is actually performing. Consumer sentiment—a key measure of “soft data”—has fallen to record lows amid geopolitical shocks and relentless negative news flow, even as “hard data” like retail sales, employment, earnings, and stock prices remain near all‑time highs.
• FEAR TYPICALLY LEADS GAINS Periods of intense market anxiety, often driven by geopolitical shocks, have historically been followed by strong equity returns. While events like wars or crises tend to trigger short-term sell‑offs, markets have typically recovered within weeks and delivered above‑average gains in the months that followed.  
• EARNINGS DON’T JUST SURVIVE—THEY SURGE Corporate earnings are no longer merely holding up amid geopolitical uncertainty—they are booming. Profits have exceeded expectations for consecutive quarters and have accelerated into double‑digit growth, with first‑quarter 2026 earnings now tracking above +27%, the strongest pace since 2021.
• MORE MANUFACTURING MOMENTUM U.S. manufacturing momentum remained strong in April, with the ISM Manufacturing PMI holding at 52.7, marking the healthiest stretch of expansion since August 2022. That was reinforced by a +3.3% surge in March core capital goods orders—a key measure of business investment—the largest jump since mid-2020 and the eighth gain in nine months.
• RETIRING A RHYME THAT’S RUN OUT “Sell in May and go away” is a centuries‑old saying rooted in historical seasonality, but it was never meant to be a precise market‑timing rule. Over the past decade-plus, markets have regularly defied the adage, with May through July often delivering solid—or even strong—returns.

Market Summary

Asset Class Total Returns

Source: Bloomberg, as of April 30, 2026. Performance figures are index total returns: U.S. Bonds (Barclays U.S. Aggregate Bond TR), U.S. High Yield (Barclays U.S. HY 2% Issuer-Capped TR), International Bonds (Barclays Global Aggregate ex USD TR), Large Caps (S&P 500 TR), Small Caps (Russell 2000 TR), Developed Markets (MSCI EAFE NR USD), Emerging Markets (MSCI EM NR USD), Real Estate (FTSE NAREIT All Equity REITS TR).

U.S. stocks: Record highs powered by AI enthusiasm

U.S. stocks rebounded sharply from a March pullback, posting one of their strongest months in years. The S&P 500 gained 10.5% in April, marking its best monthly performance since November 2020 and logging seven record closing highs along the way. The Nasdaq also hit all-time highs, helped by renewed investor enthusiasm for artificial intelligence and semiconductor stocks.

The rally was broad but clearly tilted toward growth-oriented companies. Growth stocks returned +12.4%, far outpacing value stocks at +7.2%, as investors leaned into businesses tied to the AI investment cycle. Small-cap growth stocks were standout performers, jumping nearly +15%, with much of the strength coming from smaller technology firms rather than a traditional cyclical rebound.

Sector performance echoed this theme. Information Technology, Communication Services, and Consumer Discretionary all posted double-digit gains. In contrast, the Energy sector — March’s lone winner — slipped –3.5% in April, even as oil prices soared, reflecting profit-taking and sector rotation.

International stocks: Emerging markets steal the spotlight

Global markets joined the rally, but emerging markets clearly led the way. Non-U.S. developed markets bounced back from March losses. The MSCI World ex U.S. Index rose +7.4%, with Japan up +9.2%, its fourth gain in five months, and Europe (ex-UK) climbing +7.9%.

The real stars, however, were emerging markets. The MSCI Emerging Markets Index surged nearly +15%, its widest outperformance versus developed markets since 2016. Asia dominated the gains: Taiwan jumped +26.2%, and South Korea soared +38.2%, as investors flocked to countries deeply embedded in the global AI semiconductor supply chain. For many investors, April underscored how central AI has become not just to U.S. markets, but to global equity performance.

Bonds: Rising yields limit returns

While stocks celebrated, bond investors faced a tougher environment. Government bond markets were mixed as higher oil prices reignited inflation concerns and pushed markets to rethink the path of interest rates. Expectations for rate cuts were delayed — and in some cases replaced — by fears that policy could stay tighter for longer.

U.S. Treasuries fell for a second straight month as yields rose. The 10-year Treasury ended April at 4.37%, while the 2-year reached 3.87% and the 30-year climbed to 4.97%. Rising yields translate into falling bond prices, putting pressure on government debt.

Still, riskier parts of the bond market benefited from the equity rally. The Bloomberg U.S. Aggregate Bond Index edged up +0.1%, while high-yield bonds led with a +1.7% gain, their first positive month in the last three. Investment-grade bonds rose +0.5%, though they continued to trail high yield. Municipal bonds stood out, rallying +1.2% and outperforming both Treasuries and the broader bond market.

The economy: Solid data, uneasy consumers

Economic data painted a picture of resilience, if not exuberance. First-quarter GDP grew at an annualized +2.0%, an improvement from the prior quarter’s sluggish pace. Consumer spending rose +1.6%, and business investment in technology jumped +10.6%, the fastest in three years, driven by ongoing AI buildouts.

The labor market remains firm. The economy added about 178,000 jobs in March, the strongest pace since late 2024, and unemployment edged down to 4.3%. April also saw an upside surprise of 115,000 jobs, versus expectations for 65,000, and the unemployment rate held steady. That is the first back-to-back months of jobs gains in nearly a year.

Manufacturing continues to show strength, with the ISM Manufacturing PMI at 52.7, matching its highest level since 2022. That is now four straight months of expansionary manufacturing activity.

Inflation, however, remained a concern. Headline CPI accelerated to +3.3% year over year, fueled largely by higher energy prices, while core inflation measures ticked up more modestly. The Federal Reserve held rates steady at 3.50%–3.75%, though an unusually high number of dissents signaled internal debate as inflation risks persist.

Perhaps most striking was the disconnect between data and sentiment. While retail sales and employment remained strong, consumer sentiment dropped to historic lows, reflecting worries about energy costs and geopolitical uncertainty — a gap that continues to define the current economic landscape.

Bottom Line

April showed that markets can thrive even amid uncertainty, as long as growth and earnings hold up. For now, AI momentum and economic resilience remain powerful forces — but rising inflation and geopolitical risks are keeping investors alert.

Source: Bloomberg. Data as of April 30, 2026.
Price Returns for Equity, Total Returns for Bonds.
* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

FROM MEGA-CAP TO MANY CAPS

2026 is shaping up to be a broader rally than investors have seen in years. The Magnificent Seven (Mag 7) and the Technology sector more generally have dominated returns for the last few years. In a recent research note, Dave McGarel, Chief Investment Officer at First Trust, makes the perceptive observation that through April, none of the Mag 7 stocks are in the top five performing sectors of the year: Energy, Industrials, Materials, Real Estate, and Consumer Staples. The Mag 7 make up more than one‑third of the S&P 500’s total weight, but they have contributed just about 15% of the index’s return so far in 2026. In contrast, they accounted for roughly 60%, 51%, and 43% of returns in each of the past three calendar years, respectively. Moreover, April’s strength included almost every corner of the equity market, well beyond U.S. large caps, a welcome reward for diversified investors:

• Small-cap stocks (S&P SmallCap 600 Index) rose more than +10% in April
• Mid-cap stocks (S&P MidCap 400 Index) gained nearly +8%
• International stocks (MSCI ACWI ex USA Index) climbed +9.7%

That momentum has carried into the year. So far in 2026:

• Small-caps are up +14.4%
• Mid-caps are up +10.6%
• International stocks are up +9.1%

All three have outperformed the S&P 500’s +5.7% return, even as valuations for small-, mid-, and international stocks remain significantly lower than those of large-cap U.S. companies. After years of “narrow” Tech-dominated leadership, 2026 is showing that diversification is still effective. A basket of stocks across sectors, sizes, and regions still looks like an attractive proposition for equity investors in 2026.

A Broader Rally Than Investors Have Seen in Years

S&P 500 Year-To-Date Sector Performance

Source: Bloomberg. Data from 12/31/2025 – 4/30/2026. Returns based on price only and do not include dividends.

WHEN FEELINGS LAG THE FACTS

Exactly one year ago in this space, we explored the difference between economic “soft data” and “hard data”—two distinct ways economists and investors assess the health of the economy. As a refresher, soft data refers to measures of sentiment and expectations, typically drawn from surveys and polls. It captures how consumers and businesses feel about economic conditions. By contrast, hard data consists of objective, measurable indicators such as employment figures, retail sales, factory orders, and corporate earnings.

A widely followed example of soft data is the University of Michigan Consumer Sentiment Index, one of the longest‑running surveys of its kind, with more than 70 years of history. In April, its latest reading fell to the lowest level ever recorded. At the same time, hard data tells a dramatically different story. Retail sales, corporate earnings, and stock prices—the ultimate “hard data” barometer—are all near or at all‑time highs. The result is a striking disconnect between how Americans feel about the economy and how the economy is actually performing.

So what’s driving this split? As was the case last year, the sharp drop in consumer sentiment coincides with an unexpected geopolitical shock. In the Spring of 2025 it was tariffs. Now it’s the military conflict with Iran. Both events arrived suddenly, generated significant uncertainty, and carried inflationary implications—especially for highly visible, frequently purchased items like gasoline and food. These developments also dominate headlines. With 24‑hour cable news, mobile alerts, and trending social media topics, the coverage is relentless. That constant stream of negative news disproportionately influences emotionally driven soft data such as consumer confidence.

Hard data, on the other hand, is far less visible to most households. Few people on Main Street are aware that retail sales have reached historic highs or that weekly jobless claims recently fell to a 57‑year low. Even fewer track measures like the ISM Manufacturing PMI, which has posted its strongest four consecutive months of expansion in several years. And almost no one outside financial circles is watching core capital goods orders—a key leading economic indicator and a proxy for business investment—which continue to accelerate and are at their strongest level since 2022. Perhaps most importantly, corporate earnings are experiencing a boom not seen in decades (discussed in more detail further below).

Wall Street sees all of this. Markets absorb and aggregate hard data continuously, and that collective assessment is reflected in stock prices—which remain at or near record highs. In effect, the stock market is signaling that the weight of positive economic evidence outweighs the uncertainty, emotional stress, and inflationary pressures tied to the Middle East conflict, just as it did during last spring’s tariff turmoil. That shouldn’t be taken as a dismissal of geopolitical risks or the frictions they create, but rather as an acknowledgment that the strength of underlying economic activity is, for now, more than sufficient to counterbalance them.

Wall Street is from Mars and Main Street is from Venus

Stocks hit all-time highs as consumer sentiment hits all-time lows

Sources: Bloomberg. Data as of May 1, 2026.

FEAR LEADS GAINS

Periods of intense market anxiety can feel unsettling for investors. But history suggests those moments have often been followed by surprisingly strong gains for stocks. As we saw last year during the volatility sparked by tariff turmoil, sharp declines in consumer sentiment can create a highly emotional backdrop for markets. With March’s renewed volatility and consumer sentiment plunging to all-time lows, it’s worth stepping back and adding some historical perspective.

The old saying that “history doesn’t repeat itself, but it often rhymes” applies well to geopolitical shocks. Major events typically spark an immediate negative reaction in stocks and other risk assets. However, those sell-offs have tended to be relatively short-lived, with market returns turning positive — and often above average — in the months that followed. Looking at a sample of major geopolitical events — including the September 11 attacks in 2001, the Iraq War in 2003, the Saudi Aramco strike in 2019, COVID-19 in 2020, and the current conflict involving Iran — the average peak-to-trough decline in the S&P 500 was about 5%. The average recovery time was less than 60 days, including just 21 days so far for the current Iran conflict.

What followed those periods is notable. Across those events, the average S&P 500 return over the next six months was +6.0%, and over the next 12 months it was +8.4%. Importantly, none of those subsequent periods saw negative returns. A broader analysis reinforces the same idea. Capital Group examined sharp declines in the Consumer Sentiment Index and how the S&P 500 performed afterward. As shown in their research, the average one-year return for the S&P 500 following the seven major sentiment bottoms was a striking +28.5%.

The takeaway is counterintuitive but meaningful: major drops in consumer sentiment often align with worst-case expectations already being priced in. When fear dominates headlines and surveys, markets have frequently been closer to opportunity than danger. While every period is different and risks should never be ignored, history suggests that extreme pessimism has often set the stage for well-above-average equity returns rather than prolonged market weakness.

Extreme Pessimism Often Preceded Double-Digit Stock Returns

One-year returns in the S&P 500 Index after Consumer Sentiment bottomed

Sources: Capital Group, Bloomberg, S&P Global, University of Michigan. Consumer sentiment bottoms are reflected by cycle lows for the University of Michigan’s Consumer Sentiment Index, which is a monthly survey-based index that measures U.S. consumers’ views on current economic conditions and expectations for the future. It is derived from household responses on personal finances, business conditions, and buying conditions, and is indexed to a base year of 1966 = 100. Returns reflect total returns, with start dates based on the end of each month listed for specific lows in sentiment. As of March 31, 2026.

EARNINGS REMAIN RESILIENT SPECTACULAR!

Corporate earnings can no longer be described as merely “resilient” in the face of recent geopolitical disruptions such as the tariffs of 2025 or the Iran conflict in 2026. Instead, earnings growth has been outright spectacular—and increasingly hard to ignore.

We track earnings season regularly and one trend has become clear: corporate profits have not only exceeded expectations for several consecutive quarters, they have entered a stretch of double‑digit growth not seen since 2021. According to Bloomberg data, analysts now expect that pace to continue, with consensus forecasts calling for double‑digit earnings growth for at least the next four quarters.

The current earnings season offers a striking example. At the start of the quarter on March 5, analysts projected first‑quarter 2026 earnings growth of +11.5%. By the time the quarter ended on March 31, estimates had already been revised higher to +13.2%. As results rolled in, actual earnings climbed further. By April 24, with roughly 30% of companies reported, projected growth had risen to 15.1%. As of May 1, with about 63% of S&P 500 companies having reported, earnings growth was sitting above +27%—the strongest quarterly earnings growth rate since 2021. Put simply, corporate earnings are booming.

This strength stands out even more when viewed through a historical lens. J.P. Morgan notes that over the past 15 years, analysts have typically cut earnings‑per‑share estimates by about -2% between January and April. This year has broken that pattern. Analysts have raised earnings forecasts for all four quarters of 2026, a rare and notable shift. 

Bespoke Investment Group notes that companies are not just beating earnings expectations, but revenues as well—doing so at a top‑decile pace relative to history. And the optimism appears forward‑looking as well. Bespoke highlights that entering May, there were 6.7 percentage points more companies raising forward earnings guidance than cutting it. That imbalance suggests meaningful acceleration ahead and echoes periods of powerful earnings rebounds, including the recovery from the Global Financial Crisis, the earnings surge of 2017, and the post‑COVID boom.

The message from earnings season is clear: corporate America is not just weathering uncertainty—it is thriving despite it.

Earnings Estimates Haven’t Been Hampered by the Middle East

S&P 500 Earnings Growth (Q4-2021 – Q1-2026*)

Source: FactSet. * Data for Q1-2026 through May 1, 2026 with 63% of companies in the S&P 500 having reported actual results.

MORE MANUFACTURING MOMENTUM

In an update from this topic last month, the Institute for Supply Management (ISM) has reported another month of Manufacturing Purchasing Managers Index (PMI), and April continued the streak of strong expansionary manufacturing activity. The headline PMI rose to 52.7, matching March’s level, and resulting in the strongest stretch of economic expansion since August 2022.

The following business day after the ISM data release, the U.S. Census Bureau released the March results for Factory Orders, which came in more than twice as strong as Wall Street expectations, and further corroboration of the excellent ISM results. Bookings for all Durable Goods — items meant to last at least three years and including orders for commercial aircraft and military equipment — rose +0.8% in a largely broad advance. 

But the big story in that report was the jump in Core Capital Goods Orders, a proxy for business spending (that excludes aircraft and military equipment), and it jumped +3.3%—the most since mid-2020 and extending a solid stretch of positive business spending for eight of the last nine months. In addition, the February data was revised higher to +1.6%. Economists expect business investment will remain solid this year as companies keep spending on artificial intelligence and take advantage of more favorable tax provisions.

Manufacturing is Experiencing its Strongest Stretch in 4 years

Institute for Supply Management (ISM) Manufacturing Index

Source: Institute for Supply Management, Bloomberg.

RETIRING A RHYME THAT’S RUN OUT

“Sell in May and go away” is one of Wall Street’s oldest sayings, dating back centuries. It suggests that investors should sell stocks at the start of May, step aside during the summer, and then reinvest later in the year—typically around November. The logic comes from long‑term historical averages showing that, decades ago, stock market returns from May through October were weaker than returns from November through April. Summer months often saw lighter trading volume, more vacations, fewer earnings catalysts, and occasionally higher volatility. Over time, that seasonal pattern morphed into a catchy rule of thumb. Importantly, the saying was never meant to be a precise market‑timing strategy. It was a broad observation based on historical averages, not a guarantee about what any given year—or month—will deliver.

While the phrase still gets coverage in financial media every spring, over the last 10–12 years the story has been less and less relevant. Since roughly the mid‑2010s, markets have consistently defied the “sell in May” script, with May, June, and July frequently posting positive returns rather than the historically softer performance investors expect. In many years, those months have been among the strongest parts of the calendar. 

There are a number of forces that help explain why the old pattern has broken down:

• Structural changes in markets: Algorithmic trading, passive investing, and global capital flows have reduced the seasonal lull that once defined summer trading.
• Always‑on information: Earnings releases, economic data, central‑bank decisions, and geopolitical news now hit markets year‑round, not just during traditional “busy seasons.”
• Extended bull markets: Over the past decade, powerful bull‑market trends—led by technology, innovation, and strong corporate earnings—have kept investors engaged rather than sidelined.
• Global diversification: U.S. markets are increasingly influenced by global investors and global events, reducing the impact of traditional U.S. seasonal habits.

Over the past decade plus, investors who stayed invested through late spring and summer were frequently rewarded, while those who followed the old adage missed compounding returns. We periodically review seasonality, not for investment positioning purposes but rather to help set expectations and context. As we’ve discussed above, history shows that markets are driven far more by earnings and economic fundamentals than by the calendar alone. For long‑term investors, discipline and diversification have mattered far more than trying to sidestep a few months based on a rhyme. The bottom line is that “Sell in May and go away” may be memorable—but for more than a decade now, it hasn’t been very reliable.

Asset Class Performance

The Importance of Diversification. Diversification mitigates the risk of relying on any single investment and offers a host of long-term benefits, such as lowering portfolio volatility, improving risk-adjusted returns, and helping investments to compound more effectively.

Source: Bloomberg.

Asset‐class performance is presented by using market returns from an exchange‐traded fund (ETF) proxy that best represents its respective broad asset class. Returns shown are net of fund fees for and do not necessarily represent performance of specific mutual funds and/or exchange-traded funds recommended by The Retirement Planning Group. The performance of those funds may be substantially different from the performance of the broad asset classes and to proxy ETFs represented here. U.S. Bonds (iShares Core U.S. Aggregate Bond ETF); High‐Yield Bond (iShares iBoxx $ High Yield Corporate Bond ETF); Intl Bonds (Vanguard Total International Bond ETF); Large Growth (iShares Russell 1000 Growth ETF); Large Value (iShares Russell 1000 Value ETF); Mid Growth (iShares Russell Mid-Cap Growth ETF); Mid Value (iShares Russell Mid-Cap Value ETF); Small Growth (iShares Russell 2000 Growth ETF); Small Value (iShares Russell 2000 Value ETF); Intl Equity (iShares MSCI EAFE ETF); Emg Markets (iShares MSCI Emerging Markets ETF); and Real Estate (iShares U.S. Real Estate ETF). The return displayed as “60/40 Allocation” is a weighted average of the ETF proxies shown as represented by: 24% U.S. Bonds, 10% International Bonds, 6% High Yield Bonds, 14% Large Growth, 14% Large Value, 4% Mid Growth, 4% Mid Value, 1% Small Growth, 1% Small Value, 17% International Stock, 4% Emerging Markets, 2% Real Estate.

* The term basis points (bps) refers to a common unit of measure for interest rates and other percentages in finance. One basis point is equal to 0.01%. Bond prices and bond yields are inversely related. As the price of a bond goes up, the yield decreases.

Chris Bouffard is CIO of The Retirement Planning Group (TRPG), a Registered Investment Adviser. He has oversight of investments for the advisory services offered through TRPG.

Disclaimer: Information provided is for educational purposes only and does not constitute investment, legal or tax advice. All examples are hypothetical and for illustrative purposes only. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed. Please contact TRPG for more complete information based on your personal circumstances and to obtain personal individual investment advice.