Economic Update 4-20-2026

Economic data included producer prices rising at a faster clip than expected, and declines in industrial production and existing home sales.

Equities earned positive returns globally as the easing of Middle East tensions elevated investor moods. Bonds fared well also as inflation expectations fell. Commodities were mixed, with metals higher, but energy falling back sharply with Iran tensions down.

U.S. stocks experienced gains for the third straight week. Conditions looked uncertain at the start of the week, with the U.S. announcement of their own blockade of the Strait of Hormuz and potential destruction of Iranian ships; however, signs of the Iran wanting to negotiate pushed stocks higher again. Despite the apparent escalation on the surface, the blockade itself has been seen by some observers as a shift away from a military action towards economic-centered counterattacks. The positivity continued through the week, with a 10-day ceasefire between Israel-Lebanon announced by early Fri., as well as the Strait of Hormuz being declared “completely open” to commercial traffic. On the subtler side, the investor return to risk-taking was coupled with a reduction in hedging activity and ‘short covering’ in institutional markets, which was also significant, as it drove cash flows at the margin. While March had been a largely negative month for equities, with the S&P 500 down -5%, yet April month-to-date returns are up 9%.

By sector, the strongest results were results in the high single digits for technology, consumer discretionary, and communications services. The primary laggard was energy, as well as utilities, as stocks in the former responded in kind to the drop in oil prices last week. Real estate also gained several percent along with a drop in interest rates.

Earnings season for Q1 has begun this week (10% having reported) with expectations for the S&P 500 at year-over-year growth of 13.2%, per FactSet. Commentary so far appears to be supportive of the U.S. consumer, which has helped sentiment. As has been a well-worn trend, the Magnificent 7 companies continue to show higher earnings growth expectations (23%) relative to the rest of the ‘other’ 493 (10%, albeit still well above the multi-decade average), although most of the difference has been driven by NVIDIA. By sector, expectations are highest for technology (45% year-over-year growth), Materials (22%), and financials (20%), while expected laggards include energy (-13%, not yet having seen the effects of recent higher oil prices), health care (-11%), and communications services (-1%). Revenue growth for Q1 also remains strong, at 10% for the overall S&P, with robust profit margins of 13%.

Foreign stocks fared well also, a bit mixed by region, with emerging markets faring best, while Europe and Japan lagged the U.S. S&P by a bit. Additionally, economic growth in Europe and the U.K. came in a bit stronger than expected. This came along with Japanese and European officials noted that they’re in no rush to raise rates, preferring to first get a better handle on inflation influences. Within EM, commodity exporters Brazil and Mexico lagged, as would be expected, while most other nations experienced gains, especially in Taiwan and South Korea, which have tended to be correlated to investors returning to the U.S. tech sector.

Bonds rebounded a bit last week along with interest rates falling back, also in keeping with a reduction in global inflation expectations, related to oil. The risk-on segments of high yield and floating rate fared best, along with strong returns for equities. Foreign bonds gained in similar fashion, helped by a small drop in the U.S. dollar.

Commodity indexes fell back overall last week, led by a sharp downward move in energy prices as Middle East tensions eased, offsetting gains in precious metals and industrial metals, the latter of which is related to global economic growth expectations recovering to some extent. West Texas crude oil prices fell by nearly -12% last week to $85/barrel. That level is more in line with some strategist forecasts later this year but certainly reflect a less troubled supply environment if/as commerce remains flowing through the Strait of Hormuz.

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Sources:  LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Kiplinger’s, Marketfield Asset Management, Minyanville, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Rafferty Capital Markets, LLC, Schroder’s, Standard & Poor’s, The Conference Board, Thomson Reuters, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research.  Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends.  Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.

The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness.  All information and opinions expressed are subject to change without notice.  Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.