Second-largest April stock market move since 1950

April was a powerful month for U.S. equities, with the Nasdaq up more than 15%, the S&P 500 up more than 10%, and the Dow up more than 7%. The S&P 500 and Nasdaq both hit record highs at month-end, and April marked the strongest monthly gain for the S&P 500 since November 2020 and for the Nasdaq since April 2020. You would have to go back to 1950 to find a larger April move in the S&P 500. The rally was driven by strong earnings, especially in technology and AI-related stocks, with analysts estimating S&P 500 first-quarter earnings growth of 27.8%, the fastest pace since the fourth quarter of 2021. The breadth was also better than earlier in the year, although tech leadership remained the dominant story. The main risk is that markets are looking through inflation, oil, and geopolitical stress on the assumption that earnings growth can overpower macro headwinds.

• The rally off the lows on the back of the announcement of a ceasefire with Iran has been stunning
• It is very rare for the market to have a V-bottom like this when the drawdown was (only) 9%
• Semiconductor stocks, as per the performance of the SMH ETF, were up a stunning 40% during the month!
• The market seems to be shrugging off the conflict in Iran and choosing to focus on earnings
• While quarterly earnings have been strong, we have yet to see any of the potential inflationary headwinds from the surge in oil and other commodities since the beginning of the war
• Supportive of earnings continuing to come in strong, the BEA released its Q1 2026 GDP estimate of 2.0%; which was up from Q4 2025 but below estimates
• May is known to be a challenging month for markets, so we will be watching closely as earnings continue to come in and the geopolitical situation develops

Dissent at the Fed

The Federal Reserve left the federal funds target range unchanged at 3.50%–3.75%, choosing patience over another cut as inflation pressures re-accelerated alongside higher global energy prices. The statement noted that economic activity is still expanding at a solid pace, while job gains have been low and inflation remains elevated. The most interesting part of the meeting was not the rate decision itself, but the split inside the Fed: Stephen Miran favored a 25 bps cut, while Beth Hammack, Neel Kashkari, and Lorie Logan supported holding rates steady but objected to keeping an easing bias in the statement. That means the Fed is now divided between officials worried about a weakening labor market and officials worried that energy-driven inflation will prove sticky. For investors, the message is that rate cuts are still possible, but no longer a clean base case if oil, inflation, and geopolitical risk remain elevated.

• The Fed is trying to keep optionality, but the market should not assume a straight path to rate cuts
• The dissent is unusual and creates volatility around the direction of interest rates going forward
• This was also likely Jay Powell’s last meeting as Fed Chair, however, he indicated he would stay on as Governor
• This is also somewhat unusual, but could be Powell’s way of trying to keep the incoming Fed Chair, Kevin Warsh, in check
• Kevin Warsh is seen as being close to the White House, which will continue to be a point of contention in his confirmation hearings, expected in early May
• That said, he cleared a major hurdle with the DOJ dropping its investigation of the Federal Reserve’s building construction project
• Republican Thom Tillis had indicated he would not advance Kevin Warsh’s nomination if the DOJ investigation was ongoing
• With the DOJ dropping its investigation, the Senate Banking Committee advanced his nomination to a full vote earlier in the week

BOJ intervenes to support Yen

Japan appears to have stepped into the currency market after the yen weakened through the psychologically important 160 per dollar level, with Reuters reporting that Tokyo may have spent as much as ¥5.48 trillion, or roughly $35 billion, buying yen and selling dollars. This was Japan’s first apparent yen-buying intervention since 2024, when authorities also acted after the yen fell to multi-decade lows. The intervention helped the yen rebound sharply, but the underlying problem remains: Japan still has much lower interest rates than the U.S., while higher oil prices are especially painful for an energy-importing economy. Currency intervention can slow a disorderly move, but it rarely changes the trend unless interest-rate differentials or central-bank policy also shift. The bigger message is that global financial stress is no longer limited to equities and bonds; it is also showing up in currency markets.

• Japan is trying to defend the yen, but intervention alone is usually a temporary fix
• A weak Yen fuels inflation in Japan, something the government cannot allow to spiral out of control
• Although Japanese interest rates are trading at multi-decade highs, they are still below rates in the US
• This is a structural issue for Japan
• With Japan being a large importer of energy, the latest spike in prices affects it disproportionately
• The downstream effects of BOJ intervention are further weakening the US Dollar
• This would be supportive of commodities in the longer-term

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