Key Wealth Investment Brief

Key Takeaways

The labor market is in fine shape for now, although artificial intelligence (AI) is beginning to change its underlying composition.

In April, 115,000 jobs were added to the economy, exceeding forecasts – a further sign of economic resilience in the face of the Iran war and the first time payrolls posted positive gains in consecutive months since April/May 2025. The unemployment rate was unchanged at 4.3%.

Wages have not kept up with inflation in recent months, a situation that could put strain on many consumers. Inflation has risen in recent weeks, driven by rising energy prices. 

U.S. national retail gasoline prices have risen from below $3.00/gallon at the start of the year to $4.55/gallon on May 7, according to Evercore ISI. Average hourly earnings growth was unchanged in April, rising 0.2% month-over-month. Wages rose approximately 3.6% year-over-year in April, according to Evercore ISI.

Since the launch of ChatGPT in November 2022, the composition of the labor market has begun to shift. Sectors like health care, utilities, state government, construction, and leisure & hospitality have seen the most growth, according to data from the Federal Reserve Bank of St. Louis. The information technology, transportation, federal government, and manufacturing sectors have lost the most jobs.

On the construction side, non-residential construction employment growth has significantly outpaced residential construction employment growth since the launch of ChatGPT. The data center buildout is requiring significant resources. Utilities have also seen strong employment growth, as AI requires a large amount of power. 

Since the most recent low on March 31, 2026, global equity markets have staged a sharp rally, while oil prices have moderated.

From March 31 through May 8, 2026, non-U.S. emerging market stocks rose 20.4%, U.S. large growth stocks rose 18.5%, and the S&P 500 rose 13.0%. Over the same timeframe, U.S. small caps rose 12.2%, non-U.S. developed market stocks rose 7.1%, and U.S. large value stocks rose 6.2%. Gold rose slightly, while oil fell 12.1%.

Year-to-date (YTD) through May 8, non-U.S. emerging market stocks have risen 24.2%, U.S. small caps have risen 15.3%, the S&P 500 have risen 8.4%, and non-U.S. developed market stocks have risen 8.3%. U.S. large growth stocks have risen 10.4%, and U.S. large value stocks have risen 6.2%. 

Oil prices, despite their decline over the past 5 weeks, were still up 65.2% YTD through May 8. Gold has risen approximately 9% YTD. Bonds have generally risen 1–2% YTD, while the U.S. dollar has been essentially unchanged YTD.

Bubble watch is back on, but given the extraordinary level of capital spending by the hyperscalers, maybe it’s not a bubble.

By 2027, AI hyperscaler spending on AI capital expenditures is set to eclipse defense spending as a percentage of GDP, according to company filings, the Congressional Budget Office (CBO), and Morgan Stanley. Hyperscaler capital expenditures are projected at 3.3% of GDP in 2027, versus 2.7% for defense spending.

The impact of AI on the economy and markets is outweighing major disruptions caused by immigration, trade, and the war with Iran, and AI’s impact may grow even larger over time. We continue to advise tilting towards “AI adopters” over “AI enablers,” while continuing to own critical “AI infrastructure” companies.

We also acknowledge a degree of humility, for the future is highly uncertain and bubbles are never apparent until they burst.

Thus, we also continue to advocate for robust diversification and recommend “dollar cost selling” when positions become outsized.

Bottom Line – how to invest now.

We expect volatility to remain elevated, and we continue to advocate for robust diversification. Bonds may continue to struggle to add ample diversification amidst an environment of larger federal deficits and higher interest rates. Bonds may show higher correlations with stocks in such an environment, leading to less portfolio diversification.

Even before the Iran War, we held the view that inflation could be persistent (due to rising nationalism along with other forces). The Iran crisis adds a material new source of risk, and although we don’t see history repeating itself in lock-step with the 1970s, investors may want to maintain allocations to real assets after the conflict ends.

Another argument for diversification: the S&P 500 index has become much more concentrated. In 2006, the S&P 500 had approximately 35% exposure to growth stocks, 39% blend, and 26% value, according to data from Bank of America (BofA). In 2026, the S&P 500 holds 46% growth stocks, 42% blend, and only 11% value stocks, according to BofA.

In sum, real investors need real assets, and U.S. investors need exposure beyond U.S. financial assets and concentrated indexes.

Markets generally “settle up” over time. Long-term investors should not become too bearish. Short-term and downside volatility is the price paid to earn long-term outperformance: in the past 75 years, the S&P 500 experienced an intra-year decline of 14% on average, but historically still finished the year positive 78% of the time, according to Creative Planning.

Equity Takeaways:

Stocks were mixed in early Monday trading. The S&P 500 rose approximately 0.2%, to 7413. The tech-heavy Nasdaq rose approximately 0.1%, while small caps fell approximately 0.2%. International shares were mixed.

The S&P 500 set another new high last week and is in the midst of a 6-week winning streak that began in late March. The rally has been driven by significant earnings beating expectations.

Earnings growth has surged. At 27.7% year-over-year, Q1:2026 earnings growth is on pace to be the strongest since the pandemic, according to FactSet. Just five weeks ago, Q1:2026 earnings growth was projected at 13.1%.

Micro-cap stocks staged an upside breakout last week on an absolute basis, as well as on a relative basis compared to the S&P 500. Micro-cap strength is a sign of expanding breadth, a healthy signal.

After lagging during the first quarter, the momentum and growth factors have recovered and are once again leading the markets higher. The dividend and value factors are consolidating.

Fixed-Income Takeaways:

Treasury yields were relatively stable last week. Long-term yields declined several basis points (bps), while short-term yields rose slightly.

In early Monday trading, Treasury yields were 2–3 bps higher across the curve: 2-year Treasuries were yielding 3.92%, 5-year Treasuries 4.05%, 10-year Treasuries 4.39%, and 30-year Treasuries 4.97%.

Since the start of the Iran war, front-end yields have risen as investors have attempted to gauge the impact of the war on future inflation. The next move by the Federal Reserve (Fed) has come into question, as Fed governors have expressed divergent views in recent weeks. The near-term path for rates is uncertain. The current fed funds rate is the target range of 3.50% to 3.75%.

Fed Chair Jerome Powell’s term is expected to end this week. Kevin Warsh is expected to be sworn in as his successor, with Powell staying on as governor for an indefinite period. Warsh is expected to be more inclined to rate cuts than Powell. Warsh will still need to build a consensus amongst his colleagues however, which may be difficult in the current environment. 

Credit spreads remained relatively stable last week, also CCC-rated bonds (the lowest-rated credits) widened by 16 basis points. Higher-rated bonds outperformed lower-rated bonds last week. On an absolute basis, credit spreads remain tight.

Key Takeaways

Economic growth rebounded in the first quarter, but the outlook remains clouded by the war in Iran and spiking energy prices.

Real U.S. GDP grew 2.0% in Q1:2026, up from 0.5% in the fourth quarter of 2025. Q4:2025 growth was negatively impacted by the federal government shutdown. Department of Government Efficiency (DOGE) layoffs also went into effect in Q4:2025. 

Consumer spending is slowing somewhat, while investment in technology is booming, according to data from the Bureau of Economic Analysis (BEA). The housing market is slowing.

Increased technology capital expenditures are flowing directly into certain sectors, such as chipmakers. Productivity is increasing for companies that adopt AI. That said, large capital expenditures entail increased risk as we move from the enablement phase of AI to the adoption phase.

Weekly jobless claims plummeted close to all-time lows last week, dropping to just 189k. The last time claims were this low was in the 1960s, when the labor market was much smaller. Layoffs remain very low, even as job growth continues to slow.

Wages, as measured by the Employment Cost Index (ECI), are slowing, according to data from the Federal Reserve Bank of St. Louis. Inflation is rising, driven by the recent sharp increase in oil prices, suggesting that inflation-adjusted wages are under pressure.

Federal Reserve (Fed) independence is alive and well. Energy prices are becoming more prominent in the Fed’s thinking.

Last week, the Fed kept the fed funds rate target range at 3.50% to 3.75%. Last week’s press conference was Fed Chair Jerome Powell’s final appearance as chair. Kevin Warsh is set to assume the role of Fed Chair going forward. Powell will stay on as a governor in an unusual move; the last time a retiring chairperson stayed on the Committee was in 1947.

Four Fed officials dissented during last week’s meeting, the largest number of dissenters since the early 1990s. Three officials objected to the easing bias in the latest Fed statement, preferring more neutral language. One official dissented in favor of rate cuts. The Fed specifically called out the recent rise in energy prices in their statement.

Bottom Line – how to invest now.

We expect volatility to remain elevated, and we continue to advocate for robust diversification. Bonds may continue to struggle to add ample diversification amidst an environment of larger federal deficits and higher interest rates. Bonds may show higher correlations with stocks in such an environment, leading to less portfolio diversification.

Even before the Iran War, we held the view that inflation could be persistent (due to rising nationalism along with other forces). The Iran crisis adds a material new source of risk, and although we don’t see history repeating itself in lock-step with the 1970s, investors may want to maintain allocations to real assets after the conflict ends.

Another argument for diversification: the S&P 500 index has become much more concentrated. In 2006, the S&P 500 had approximately 35% exposure to growth stocks, 39% blend, and 26% value, according to data from Bank of America (BofA). In 2026, the S&P 500 holds 46% growth stocks, 42% blend, and only 11% value stocks, according to BofA.

In sum, real investors need real assets, and U.S. investors need exposure beyond U.S. financial assets and concentrated indexes.

Markets generally “settle up” over time. Long-term investors should not become too bearish. Short-term and downside volatility is the price paid to earn long-term outperformance: in the last 75 years, on average, the S&P 500 experienced an average annual decline of 14% but historically still finished the year higher 78% of the time, according to Creative Planning.

Equity Takeaways:

Stocks were mixed in early Monday trading. The S&P 500 was essentially flat at 7228. The tech-heavy Nasdaq rose approximately 0.1%, while small caps fell approximately 0.2%. International shares were mixed.

The S&P 500 rose approximately 10.5% in April, a very strong rebound after the March selloff. Strong Q1:2026 earnings continued to help drive the market higher, and investors continue to look past the conflict in Iran.

After the sharp rebound rally in April, many market participants are looking for a period of consolidation, but the market carries strong momentum into May. We believe the current rally likely has more room to run, led by technology (specifically semiconductors). Conversely, within technology, the software sector remains under pressure.

Small caps outperformed large caps, and value stocks outperformed growth stocks year-to-date (YTD) through the end of April. Small value stocks have risen 15.2% YTD, while small growth stocks have risen 11.5% YTD. Large value stocks are up 10.4% YTD, while large growth stocks are up 0.9% YTD.

The energy sector (a value sector) is up approximately 33% YTD and is leading the market. Industrials and materials are next, each rising approximately 13% YTD. The two worst sectors have been healthcare and financials, down 5.3% and 4.5% YTD, respectively.

Fixed-Income Takeaways:

Treasury yields moved higher across the curve last week. 2-year yields rose approximately 10 basis points (bps) and have risen more than 40 bps YTD. 10-year yields rose approximately 7 bps last week.

In early Monday trading, Treasury yields rose another 3–4 bps across the curve. 2-year Treasuries were yielding 3.93%, 5-year Treasuries 4.07%, 10-year Treasuries 4.42%, and 30-year Treasuries 5.01%.

Before the war, market participants were expecting about 75 bps of Fed rate cuts by early to mid-2027. Now, traders expect the Fed to remain on hold for at least a year. Rising energy prices and the ensuant risk of higher inflation have caused a change in sentiment. The current fed funds rate is 3.50% to 3.75%.

Inflation is not localized to the United States. Longer-term bond yields are rising across the globe. Since the start of the Iran War, UK 10-year yields have risen almost 80 bps, German and U.S. 10-year yields have risen more than 40 bps, and Japanese 10-year yields have risen 30–40 bps.

Corporate bond spreads (both investment-grade and high-yield) remained stable last week with a tightening bias even as Treasury yields continue to rise. Corporate bond investors remain enticed by high all-in yields, despite tight spreads relative to history.

Purple Ties and Red Lines: Powell's Final Defense of the Fed
April 29, 2026

Key Takeaways

• On hold: The Federal Reserve held interest rates at the current range of 3.50% – 3.75%, but unity is fraying beneath the surface.
• Historic dissents: For the first time since 1992, four policymakers (Hammack, Miran, Kashkari, Logan) dissented — marking a clear break from consensus.
• Final message: Jerome Powell drew a clear red line — the Fed is “strictly nonpolitical.”
• Symbolism matters: The purple tie reinforced neutrality in both message and optics.
• Open-ended continuity: Powell said he will remain as Governor for now, leaving the timeline, and its impact, uncertain.
• Investor lens: Favor flexibility over conviction — portfolios must pivot, not predict.

The Decision and the Signal

At its April 29, 2026, meeting, the Federal Reserve held the fed funds rate unchanged at the target range of 3.50%–3.75%, delivering a decision that was widely expected.

The statement itself offered little in the way of directional change. The Committee maintained a balanced tone on inflation, growth, and the labor market and avoided signaling any near-term shift toward easing or tightening. Forward guidance remained deliberately flexible, preserving optionality rather than committing to a defined path. That restraint was not accidental — it was strategic.

With inflation still above target, growth showing signs of moderation but not deterioration, and financial conditions sensitive to both data and geopolitics, the Fed chose continuity over clarity. But if the statement projected stability, the vote told a different story.

For the first time since October 1992, four policymakers — Hammack, Miran, Kashkari, and Logan — dissented. The dissents themselves reflected differing views on the balance of risks — whether policy remains sufficiently restrictive, or risks becoming so. And presiding over that moment was Jerome Powell — his final meeting as Chair.

A Chair in Defense of the Institution

“We are strictly nonpolitical. I can’t stress that enough,” Powell did not hedge. He did not soften the message. He delivered it plainly, almost emphatically. This was not just a routine affirmation of independence, it was a line drawn. Thias was more than rhetoric, it was a red line: a clear boundary between monetary policy and political influence. If anything, Powell’s tone was measured but firm, less about signaling the next move and more about reinforcing the framework behind it.

Even the Tie Made the Point

“Purple is a good color for that.” Powell explained that his choice of a purple tie was an intentional effort to avoid political symbolism. It was a brief aside, but a revealing one. Even in appearance, neutrality was the message. In a press conference defined by questions about politics, pressure, and the future of the institution, Powell answered not just with words, but with optics. At a moment when every signal is scrutinized, even small choices carried meaning.

An Uncertain Exit and an Open Question

Powell, whose term as a Governor runs through January 2028, indicated he will remain in that role for now, while leaving open how long he intends to stay. That nuance matters.

A Fed Chair who steps down, but remains on the Board, introduces continuity at a moment of transition. But without a defined timeline, it also extends uncertainty. His presence could provide institutional stability, or serve as a counterweight, depending on how the Committee evolves under new leadership.

It also raises a more subtle dynamic: a former Chair still at the table can influence not just decisions, but the tone and balance of internal debate. That uncertainty now becomes part of the policy backdrop.

A More Divided, and More Neutral, Fed?

The four dissents are not just a historical footnote – they are a signal.

Dissents point to a Federal Reserve that is moving away from consensus-driven communication and toward a more openly contested policy framework. Rather than presenting a unified path, the Committee is increasingly reflecting a broader range of views about the economic outlook and the appropriate policy response.

A broader range of views may ultimately represent a different kind of neutrality – not in the level of rates, but in the process itself. A Fed that tolerates more visible disagreement may, in time, be one that more accurately reflects underlying economic uncertainty. But that evolution comes with a tradeoff. In the near term, it reduces predictability and weakens the signaling power of the Committee. Markets are left to interpret not a single message, but a distribution of views, each with its own implications for the path of policy. And at a moment of leadership transition, that distribution may widen before it narrows.

What This Means for Investors

For investors, this moment is not just about Powell’s farewell as Fed Chair, it is about the rules of the game shifting beneath the surface.

A more divided Committee means a wider range of potential policy outcomes and a diminished ability to rely on clean, consensus-driven forward guidance. Even if the policy rate remains unchanged in the near term, expectations around that rate are likely to become more volatile.

At the same time, the path of rates is becoming less linear. A more fragmented Fed introduces two-sided risk: inflation that proves stubborn could delay easing or even revive tightening, while a slowing economy could accelerate cuts beyond what markets currently anticipate. The base case matters less when the range of outcomes expands.

Layered on top is leadership uncertainty, not about whether Powell will remain, but for how long. With Kevin Warsh stepping in as the new Chair while Powell remains on the Board, markets will be parsing not just incoming data, but how differing perspectives within the Committee shape policy decisions. Markets are no longer just pricing in the path of rates — they are pricing the evolution of the Fed itself. This is no longer an environment that rewards static positioning. It is an environment that rewards flexibility. The most effective portfolios will not be those that try to predict the Fed’s next move, but those constructed to adapt quickly, regardless of what that move turns out to be.

The Bottom Line

A divided Fed. A departing Chair. A leadership transition. Powell’s final meeting was not defined by a policy move, but by something more important: a defense of institutional independence at a moment of change. He drew a clear line between politics and policy, between perception and principle. The purple tie was the signal. The red line was the substance.

And as he steps away as Chair but not yet from the institution, the question is no longer just what the Fed is. It is how it evolves from here. For investors, the evolution may matter more than the next rate move. 

Key Takeaways

U.S. recessions vs. oil shocks: ignoring history, or new paradigm?

The Strait of Hormuz remains closed. In early Monday trading, oil prices were rising 2–3%. Front-month WTI crude was trading around $96.00 per barrel, while front-month Brent crude was trading around $101.50 per barrel.

Throughout nearly the past 50 years, when the price of oil had doubled in a short period of time, a U.S. recession ensued, according to data from Alpine Macro. Currently, despite a similar spike in oil prices, U.S. recession odds seem low to modest based on many indicators.

Perhaps past U.S. recessions and oil spikes were coincidental. Alternatively, declining U.S. energy dependence (greater energy efficiency) may represent a new paradigm in the relationship between oil and the economy. A major question: how will artificial intelligence (AI) alter oil dependency?

Supply concerns remain. Gulf state oil production is down approximately 57% compared to the start of the Iran conflict, according to Alpine Macro. In addition, the global fertilizer market has heavy exposure to supplies that pass through the Strait of Hormuz, according to data from the American Farm Bureau Federation.

Federal Reserve (Fed) Chair Jerome Powell will likely oversee his last press conference as Fed Chair this Wednesday, April 29, 2026. Coincidentally, central banks throughout the world are meeting this week.

Last week, the Justice Department’s ongoing case against Fed Chair Powell was dropped. With this news, Kevin Warsh will likely be confirmed as Fed Chair soon. Warsh is seen as more dovish than Powell and more inclined to cut interest rates despite uncertainty around the forward path for inflation. The current fed funds rate is the target range of 3.50% to 3.75%.

Global investors are worried that the Iran War has raised the probability of earlier-than-expected interest rate hikes. Global inflation expectations have risen sharply over the past two months as the conflict has continued.

At the same time, a stronger dollar is tightening global financial conditions, intensifying concerns over shortages and weaker economic growth.

Despite concerns about oil prices and inflation, economic momentum is building based on certain metrics, and corporate earnings remain strong. AI strength remains a dominant narrative.

Year-to-date (YTD) rail volumes are at their highest levels since 2019 according to Evercore ISI, generally a good sign for economic activity. In addition, AI capital spending continues to boom, according to data from Bloomberg and Bianco Research.

AI capital spending is driving strong earnings within certain areas of the technology sector. At the start of this year, technology sector earnings were projected to grow 28.6% year-over-year in 2026, according to FactSet. Now, technology sector earnings growth is projected at 38.4% – a dramatic increase.

In aggregate, 2026 full-year earnings growth estimates for the S&P 500 have increased from 14.9% to 18.6% since the beginning of this year. This rate of earnings growth is tremendous and is driving stock prices higher.

Bottom Line – how to invest now.

We expect volatility to remain elevated, and we continue to advocate for robust diversification. Bonds may continue to struggle to add ample diversification amidst an environment of larger federal deficits and higher interest rates. Bonds may show higher correlations with stocks in such an environment, leading to less portfolio diversification.

Even before the Iran War, we held the view that inflation could be persistent (due to rising nationalism along with other forces). The Iran crisis adds a material new source of risk, and although we don’t see history repeating itself in lock step with the 1970s, investors may want to maintain allocations to real assets after the conflict ends.

Another argument for diversification: the S&P 500 index has become much more concentrated. In 2006, the S&P 500 had approximately 35% exposure to growth stocks, 39% blend, and 26% value, according to data from Bank of America (BofA). In 2026, the S&P 500 holds 46% growth stocks, 42% blend, and only 11% value stocks, according to BofA.

In sum, real investors need real assets, and U.S. investors need exposure beyond U.S. financial assets and concentrated indexes.

Markets generally “settle up” over time. Long-term investors should not become too bearish. Short-term and downside volatility is the price paid to earn long-term outperformance: in the past 75 years, the S&P 500 experienced an intra-year decline of 14% on average, but historically still finished the year positive 78% of the time, according to Creative Planning.

Equity Takeaways:

Stocks were mixed in early Monday trading. The S&P 500 was essentially flat at 7165. The tech-heavy Nasdaq fell approximately 0.2%, while small caps rose approximately 0.2%. International stocks were mixed.

The S&P 500 broke to another new all-time high last Friday after consolidating for much of the week. This price action is healthy.

During the recent snapback rally, the S&P 500 took only 11 days to fully recover its 10%+ loss from March. The recovery was much faster compared to other 10%+ drawdowns since 2000, according to data from Bloomberg.

Corporate earnings remain in focus this week. Thus far, first quarter earnings have been very strong relative to historical patterns. Positive revisions have been driven by the technology sector. More than 40% of the S&P 500’s market capitalization will report this week.

By any stretch of measurement, the earnings strength in the first quarter has been remarkable. Stock prices generally follow earnings, so it’s not surprising to see the stock market at an all-time high.

Fixed-Income Takeaways:

Treasury yields moved higher across the curve last week, with short-term yields moving higher than long-term yields: 2-year Treasury yields rose approximately 7 basis points (bps) last week, while 10-year Treasury yields rose 5 bps. Heavy pending Treasury supply could keep upward pressure on yields this week.

Another factor keeping upward pressure on yields is the Iran War. The war has led to increased interest rate volatility. Investors continue to worry about the war’s impact on future inflation.

In early Monday trading, yields were drifting 1–2 bps higher across the curve. Overall, 2-year Treasuries were yielding 3.80%, 5-year Treasuries 3.93%, 10-year Treasuries 4.32%, and 30-year Treasuries 4.93%.

As noted above, incoming Fed Chair Kevin Warsh is seen as more dovish than Powell and more inclined to cut interest rates despite uncertainty around inflation. Warsh is also more inclined to reduce the Fed’s balance sheet and may alter the Fed’s policy on forward guidance. Despite the impending change in Fed Chair, market participants continue to expect the fed funds rate to stay near its current range of 3.50% to 3.75% for most of 2026.

Credit spreads were relatively calm last week. New issuance continues at robust levels. BBB-rated debt slightly outperformed higher-rated credit last week. A “risk on” tone continues in the credit markets.

Key Takeaways

The Iran War will likely have long-lasting impacts.

Oil prices may remain higher for longer; is $80 per barrel the new $60?

Interest rates may remain higher for longer (absent a substantial deterioration in the labor market).

The U.S. dollar may continue to weaken but won’t collapse.

A new type of drone-centric warfare (low-grade weaponry) could lead to a new balance of power. Drones are much cheaper than the ballistic missiles the U.S. favors, but drones have proven their effectiveness in multiple recent conflicts.

Geopolitical fragility is likely to continue, and nationalism may continue to expand. Nationalist agendas generally result in higher budget deficits and interest rates, while putting pressure on global trade and the U.S. dollar. Sectors like energy, materials, and utilities could benefit, as could real assets like gold and infrastructure.

For further discussion of these issues, please see our recent Key Questions article, entitled What Might Be Some of the Lasting Takeaways from the War in Iran?

Global diversification has been important again thus far in 2026, similar to 2025.

Year-to-date (YTD) through April 17, 2026, the best-performing stock market indices have been non-U.S. emerging markets, U.S. small caps, and non-U.S. developed markets, which have risen 16.3%, 12.9%, and 8.6%, respectively. For context, over the same period, the S&P 500 has risen 4.5%.

The energy sector has risen 23.6% YTD to lead all sectors, despite a pullback last week. Other leaders include materials, industrials, and real estate sectors, which have all risen between 12% and 15% YTD.

YTD laggards include health care and financials both falling between 3% and 4%; technology has risen 4.9%, rallying sharply in recent weeks after a slow start to the year.

The U.S. dollar is essentially flat YTD versus the global currency basket. Real assets like gold, oil, and copper continue to provide important portfolio diversification.

Bottom Line – how to invest now.

We expect volatility to remain elevated, and we continue to advocate for robust diversification. Bonds may continue to struggle to add ample diversification amidst an environment of larger federal deficits and higher interest rates. Bonds may show higher correlations with stocks in such an environment, leading to less portfolio diversification.

Even before the Iran War, we held the view that inflation could be persistent (due to rising nationalism along with other forces). The Iran crisis adds a material new source of risk, and although we don’t see history repeating itself in lockstep with the 1970s, investors may want to maintain allocations to real assets after the conflict ends.

Another argument for diversification: the S&P 500 index has become much more concentrated. In 2006, the S&P 500 had approximately 35% exposure to growth stocks, 39% blend, and 26% value, according to data from Bank of America (BofA). In 2026, the S&P 500 holds 46% growth stocks, 42% blend, and only 11% value stocks, according to BofA.

In sum, real investors need real assets, and U.S. investors need exposure beyond U.S. financial assets and concentrated indexes.

Markets generally “settle up” over time. Long-term investors should not become too bearish. Short-term and downside volatility is the price paid to earn long-term outperformance: in the past 75 years, the S&P 500 experienced an intra-year decline of 14% on average, but historically still finished the year positive 78% of the time, according to Creative Planning.

Equity Takeaways:

Stocks dipped slightly in early Monday trading. The S&P 500 declined approximately 0.2%, to 7113. The tech-heavy Nasdaq declined approximately 0.3%, while small caps rose approximately 0.1%. International stocks were generally lower.

The S&P 500 rallied sharply last week, decisively moving above the psychologically important 7000 level, while making a series of new 20-day highs. The market has reasserted its trend higher after struggling to break above 7000 since late last year.

The rally has been strong but narrow. At one point in the middle of last week, the S&P 500 had risen 9.8% in the previous 10 trading days, which was at the high end of the 99th percentile of all 10-day returns, according to 3Fourteen Research.

At the same time, on April 15, 2026, the S&P 500 reached an all-time high, but only 12 stocks in the Index reached a 52-week high, a very low number historically, according to Brown Technical Insights. Breadth is weak by this metric.

Another sign of weak breadth – the percentage of S&P 500 issues trading at a 20-day high was approximately 25% at the end of last week and never eclipsed 40% in the recent rally. Typically, this metric will rise above 50% during a strong breadth thrust.

The market is likely to remain choppy, but strong earnings should support higher prices over time. Rate cuts are back on the table with the situation in the Middle East potentially thawing, another possible tailwind to the stock market. Finally, the shape of the implied volatility (VIX) curve has normalized, implying that market participants are looking through the situation in the Middle East.

Fixed-Income Takeaways:

Intermediate Treasury yields declined 5–10 basis points (bps) last week, with short-term yields falling more than long-term yields: 2-year Treasury yields declined 9 bps, while 10-year yields declined 7 bps. A thawing of the situation in the Middle East supported both stock and bond prices.

In early Monday trading, Treasury yields were 2–3 bps higher across the curve. Overall, 2-year Treasuries were yielding 3.73%, 5-year Treasuries 3.87%, 10-year Treasuries 4.27%, and 30-year Treasuries 4.90%.

Credit spreads tightened slightly last week in sympathy with higher equities, continuing their recent recovery. Both investment-grade (IG) and high-yield bond spreads are now back tao pre-conflict levels, implying that investors are not expecting a sustained war in the Middle East.

Another example of a calming market: the spread between single A-rated bonds and BBB-rated bonds has tightened to pre-conflict levels. Some pockets of opportunity remain, but in general, credit spreads are relatively tight once again.