April 2026 Market Recap: From Geopolitics to Growth

April was a powerful reminder of how quickly market narratives can shift. What began as a month dominated by geopolitical uncertainty ultimately transitioned into a strong, risk-on rally driven by earnings, AI momentum, and shifting expectations around monetary policy.

A Historic Month for Equities

Equity markets delivered one of their strongest performances in decades. The S&P 500 rose 10.49% (per Bloomberg from 4/1/26 through 4/30/26), marking one of the top monthly returns over the past 35 years (monthly returns of the S&P 500 per Bloomberg from 1/1/91 through 4/30/26). Meanwhile, fixed income lagged, with the Bloomberg U.S. Aggregate Index gaining just 0.11% (per Bloomberg from 4/1/26 through 4/30/26), as investors rotated out of defensive positions and back into risk assets.

Geopolitics: From Headline Risk to Background Noise

Early in the month, markets were highly sensitive to developments in the U.S.–Iran conflict. A two-week ceasefire agreement on April 8 initially provided relief, but tensions escalated shortly after when the U.S. deployed naval forces to restrict Iranian oil exports through the Strait of Hormuz. While this move was initially viewed as an escalation, markets ultimately interpreted it as a strategic effort to pressure Iran toward negotiations.

Despite continued rhetoric from both sides, markets have become increasingly desensitized to geopolitical headlines. Investors are now largely pricing in an eventual resolution and appear to assign a low probability to further escalation.

As a result, the conflict has transitioned from a primary market driver to more of a macro backdrop, allowing investors to refocus on fundamentals such as earnings and policy. That said, we believe this remains a key risk to monitor. Any signs of prolonged conflict or renewed escalation could quickly reintroduce volatility.

Inflation: Elevated, But Moderating Beneath the Surface

Inflation remains a central focus for markets, but the latest data suggests a more nuanced picture. March CPI came in at 3.3% year-over-year, largely driven by elevated energy prices tied to geopolitical tensions. However, core CPI (“Consumer Price Index”), which excludes food and energy, rose just 2.6%, which slightly below Dow Jones estimates and consistent with recent trends that we have observed. We believe this suggests that while headline inflation remains elevated, underlying inflation pressures are stabilizing. If energy prices normalize, there is a strong case that current inflation spikes may prove transitory.

The Fed: A Turning Point Approaches

Monetary policy is entering a period of transition. The Federal Reserve held rates steady in April, as expected, but the meeting revealed a notable shift beneath the surface. There were four dissenting votes, the highest level of disagreement in over 30 years, signaling increasing division within the committee as current Fed Chair Jerome Powell enters the end of his term as Fed Chair.

As such, Kevin Warsh, President Trump’s nominee for Fed Chair, is nearing confirmation and is widely expected to favor a more accommodative policy stance. However, Fed futures currently reflect a reduced probability of rate cuts and even a modest chance of rate hikes amidst uncertainty on the duration of the Iran war and the ultimate, lasting inflationary impacts from it. That said, we continue to believe that easing remains the more likely path.

Earnings & AI: The Real Market Driver

A cluster of major earnings reports from Alphabet, Amazon, Meta, and Microsoft (four of the “Magnificent 7”) became a focal point for the markets as April concluded. Would earnings from four of the largest companies in the world indicate that equity markets were appropriately (re)pricing asset prices despite the economic impacts unfolding from the Iranian war?

All four companies beat both revenue and earnings expectations and provided positive forward guidance. However, the underlying story wasn’t just strong results, but rather, it was AI-driven growth and investment.

• Amazon, Microsoft, and Alphabet all showed strong growth in their cloud businesses, reinforcing continued demand for AI infrastructure.

• Meta demonstrated strong ad revenue growth driven by AI-powered targeting but raised concerns among investors with a significant increase in capital expenditures tied to AI infrastructure. The extent to which recent increases in capital expenditures are translating into meaningful return on investment (“ROI”) remains uncertain.

This divergence highlights an important shift in market thinking. Investors seem to be placing an emphasis on the return on AI investment. For example, Alphabet’s stock soared following their earnings report as the company has demonstrated explosive growth in their cloud based business. Meanwhile, Meta Platform’s stock sank, despite beating revenue and earnings expectations as their capital expenditures on AI increased without definition around how that will translate to more growth. The bottom line is that investors are no longer simply rewarding companies for their investment in AI, but rather, how that investment is translating to growth. This is an extremely important distinction, especially as we witness the divergence between winners and losers from the “AI Revolution”.

That said, we maintain that we are still in the early stages of a multi-year AI investment cycle that is likely to drive both markets and economic activity for years to come, but as mentioned, the winners will begin to distance themselves from the losers.

Ultimately, the earnings releases were a net positive mover for the markets. Despite the mixed reactions at the individual stock level, the broader market responded positively. The S&P 500 rose over 1% on April 30, closing above 7,200 for the first time as the April led rally continues its momentum.

Final Thoughts

April marked a clear transition in market leadership and investor focus.

Geopolitical risks, while still present, have taken a back seat to:

• Earnings strength

• AI-driven growth

• Shifting monetary policy expectations

However, we are faced with new questions:

• How sustainable is AI-driven growth?

• Are current levels of capital investment justified?

• How will monetary policy evolve under new Fed leadership?

These are just a few of the questions that will shape markets in the months ahead.

Bottom Line

Markets are currently seemingly focused on fundamentals, investment cycles, and policy direction. And right now, the dominant force driving all three is clear: Artificial Intelligence.

Disclosure

The S&P 500 (Standard & Poor's 500) is a stock market index tracking the performance of roughly 500 leading U.S. publicly traded companies, representing about 80% of the total U.S. market capitalization.

The Bloomberg US Aggregate Bond Index (often called "the Agg") is a broad-based, market-capitalization-weighted benchmark measuring the performance of the US dollar-denominated, investment-grade, fixed-rate taxable bond market.

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