April Update
Headlines & Highlights
- Iran War flares up, ceasefire in jeopardy: A four-week reprieve from active hostilities in the Persian Gulf region ended on May 4, with Iran firing on vessels and its neighbors in response to a U.S. Navy effort to reopen the Strait of Hormuz to ship traffic. The fighting has cast doubt on the durability of a ceasefire in place since early April. An estimated 2,000 tankers and other ships have been bottled up for weeks in the gulf, where about 20% of the world’s oil is produced. The supply crimp has pushed up the price of crude by more than 50% since the war started in late February. Iran has claimed sovereignty over the strait, but this claim is disputed by the U.S. and other nations that consider the vital passage to be international waters.
- Powell chairs his final FOMC meeting: Jerome Powell in late April chaired his final meeting of the Federal Reserve panel that sets short-term interest rates. At that gathering, the Federal Open Market Committee (FOMC) voted to hold rates at the 3.50% to 3.75% level that has prevailed since a series of cuts in late 2025 to support a softening labor market. A jump in inflation – largely driven by the spike in energy costs – has stayed the Fed’s hand on rates. The late April meeting revealed a rift within the FOMC: Four of the 12 voting members dissented on the decision, with three of them indicating that the Fed was wrong to signal that the next likely move on rates will be a cut because inflationary conditions may justify a rate increase.
- Equities rebound from March sadness: After a dismal March dominated by war worries, investors in nearly all asset classes enjoyed an outstanding April. The S&P 500 posted its best month since November 2020 – the benchmark ETF for the large-cap stock index gained 10.5% in April, lifting its year-to-date return into the black at 5.7%. A key driver for stocks has been a big leap in profitability: FactSet reports that first-quarter earnings for S&P 500 companies are running 27% above the same period in 2025. U.S. small caps performed better than large, with the benchmark Russell 2000 ETF up 12.1% in April (+13.1% in 2026), and REITs added 8.6% (+10.0% YTD). International stocks also took part in the rally – non-U.S. developed markets picked up 5.3% during the month (+6.6% in 2026) and emerging markets 12.7% (+17.0% YTD). Bonds were slightly positive for the month.
Select Market Returns
Our Views
- While Iran War fighting has flared up again, we maintain our view that the conflict will not be prolonged, as both Iran and the U.S. have stronger incentives to make peace than to keep hostilities going. Even when a deal emerges, energy prices will almost certainly remain elevated for at least several months.
- Higher energy prices and accompanying inflation have not translated into lower investor enthusiasm – U.S. large caps and small caps have posted new record highs on a regular basis since mid-April. We see this trend as evidence that the market is looking past the current issues with energy and focusing more on robust corporate revenue and earnings.
- U.S. GDP grew at a 2% annualized rate in the first quarter of 2026, according to the Bureau of Economic Analysis. This represents a sizable increase from the 0.5% growth rate in the final quarter of 2025 and aligns with our view that the economy’s solid footing will continue to support revenue and earnings growth for the rest of 2026.
- The AI buildout was the biggest contributor to GDP growth in the January to March period. The largest AI infrastructure players are boosting their spending to more than $700 billion this year – this impact plus the stimulative benefits of the Big Beautiful Bill are offsetting much of the economic drag created by war-related inflation.
- With inflation over 3% for the first time since 2024, there are no expectations for the Fed to cut short-term interest rates at its summer meetings in June or July. Futures activity suggests that investors now believe a rate hike is likelier than a cut in 2026, but we still believe that the Fed will make a cut late in the year to support a softer jobs market.
The material shown is for informational purposes only. Past performance is not indicative of future performance, and all investments are subject to the risk of loss. Forward-looking statements are subject to numerous assumptions, risks, and uncertainties and actual results may differ materially from those anticipated in forward-looking statements. As a practical matter, no entity is able to accurately and consistently predict future market activities. Information herein incorporates Altair Advisers’ opinions as of the date of this publication, is subject to change without notice, and should not be considered as a solicitation to buy or sell any security. While efforts are made to ensure information contained herein is accurate, Altair Advisers cannot guarantee the accuracy of all such information presented. Material contained in this publication should not be construed as accounting, legal, or tax advice. See Altair Advisers’ Form ADV Part 2A and Form CRS at https://altairadvisers.com/disclosures/for additional information about Altair Advisers’ business practices and conflicts identified. All registered investment advisers are subject to the same fiduciary duty as Altair Advisers.