April 2026 Market Report: Stagflation Risk, Strait Standoff & U.S. Stocks at New Highs

I hope this message finds you well. With markets staging a powerful recovery even as the situation in Iran remains unresolved, I’d like to share our latest April 2026 Market Report covering the cross-currents shaping the U.S. economy, the Federal Reserve, and global markets.

Click on the video below to watch.

Key Highlights from the April 2026 Market Report:

U.S. Economy Rebounds, But Inflation Spikes

• March: U.S. economy added 178,000 jobs (expectations: 59,000)
• Q1 2026 GDP rebounded to 2% annualized from Q4 2025’s 0.5%
• PCE inflation surged to 4.5% in Q1
• Gasoline alone surged 21.2% in March
• Full-year U.S. inflation forecast revised up to 4.2%

Fed Caught in Stagflation Bind

• Pre-war expectation: two rate cuts in 2026
• Current expectation: at best one cut, with rate hike risk rising
• 10-year Treasury yield at 4.4%, up from below 4% pre-war
• Kevin Warsh expected to be confirmed as Chair the week of May 11
• Warsh known as hawkish and inflation-focused

U.S. Stocks Recover to New All-Time Highs

• S&P 500 slid roughly 9% from war onset through mid-March
• S&P 500 marked its best month in April since 2020
• April leadership: Communications Services and Tech up ~13%, Consumer Discretionary up over 10%
• Energy still leads YTD at +25%, but pulled back 9% in April on ceasefire hopes
• Financials worst Q1 since the 2023 banking crisis

Non-U.S. Stocks Outpacing the U.S.

• Emerging markets up almost 15% year to date
• Global stocks outside the U.S. up about 9%; S&P 500 trailing at just above 5%
• South Korea and Taiwan leading on the AI semiconductor rally
• Energy exporters Canada, Norway, Brazil also leading
• Energy importers under pressure: Germany’s GDP forecast cut, U.K. inflation above 5%, India dealing with LPG shortages

Iran War: Fragile Ceasefire, Permanent Damage

• Two-week U.S.-Iran ceasefire took effect April 8; extended indefinitely April 21
• U.S. imposed naval blockade on Iranian ports April 13
• Brent crude at $114, highest since mid-2022, up ~90% year over year
• Bypass pipelines max at 5 million barrels/day vs. 20 million normally through the Strait
• IEA calls this the largest supply disruption in global oil market history

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Our Perspective

April was a study in contrasts. The U.S. economy posted a genuine positive surprise with Q1 GDP rebounding to 2% and 178,000 jobs added in March. U.S. stocks recovered the war-related 9% drawdown and pushed to new all-time highs, with the S&P 500 marking its best month since 2020. International markets did even better, with emerging markets up nearly 15% year to date and South Korea and Taiwan posting extraordinary gains on the AI semiconductor rally.

But underneath that recovery, the inflation picture has shifted sharply. PCE inflation jumped to 4.5% in a single quarter, gasoline surged 21.2% in March alone, and the full-year U.S. inflation forecast has been revised up to 4.2%. The Fed is now caught between a still-expanding economy and sharply rising prices, the classic stagflation bind, just as a new chair, Kevin Warsh, prepares to step in following expected confirmation the week of May 11.

The market is pricing the war’s resolution as the base case. The risk is that it’s early. The April 8 ceasefire produced only a brief reopening of the Strait of Hormuz before it closed again, and the math on bypass pipelines is unforgiving: even running every alternative flat out gets you to 5 million barrels per day against the 20 million that normally flow through the Strait. The IEA calls this the largest oil supply disruption ever, and Q1’s 2% GDP captured only one month of war impact, so the real test for the economy comes in Q2.

I encourage you to watch the full video for a comprehensive discussion of these developments. As always, please reach out if you’d like to review your portfolio positioning given current conditions.

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