Markets rebounded in April, as investors cheered a pause in hostilities in the Middle East despite oil prices remaining stubbornly high.
We continue to lean on our data-driven Three Dials allocation framework, which held steady during the month of April as we summarize below.
TECHNICAL
While the conflict in the Middle East is far from over, so far markets are following a familiar playbook around geopolitical turmoil, which very rarely leads to derailing an existing bull market. In fact, by some metrics this was the fastest V-shaped recovery on record for the S&P. With support firmly intact, our Technical Dial remains in a Positive position.
ECONOMIC
While the stock market plowed toward new all-time highs, consumer sentiment went the other way, with the University of Michigan’s sentiment index hitting an all-time low in April, with consumers fearful over higher prices and likely to conserve spending as a result. This pattern is already emerging in the data, with consumption decelerating in Q1 for the second consecutive quarter. Meanwhile, nearly half of GDP growth was concentrated in AI-infrastructure spending, demonstrating the dangerous level of reliance on one sector for economic growth. As such, our Economic Dial remains Negative.
VALUATION
AI valuations were back in the crosshairs in April, with OpenAI posting revenue and user data that missed internal targets for Q1, which hit the tech-heavy Nasdaq even as OpenAI has yet to go public. While first quarter S&P earnings have been stellar so far, P/E ratios remains stretched, and as such our Valuation Dial continues to take a Negative reading.
MARKET COMMENTARY
Markets rebounded in April, as investors cheered a pause in hostilities in the Middle East despite oil prices remaining stubbornly high. The S&P 500 bounced back +10.5% in April to bring its 2026 return up to +6%. Smaller company stocks also posted a strong return on the month, rallying +12% in April for a +13% gain so far this year. International stocks also added +9% in April (+8% year-to-date), with strength from chipmakers in Taiwan and Korea offsetting weakness in Europe and Japan.
Within fixed income, bond prices continue to tread water as investors remain uncertain over the potential inflationary impact of the Strait of Hormuz blockade. The Bloomberg Aggregate Bond Index remained roughly flat on both a month-to-date and year-to-date basis. The Bloomberg Commodity Index jumped another 4% (+30% YTD), with higher energy and agriculture prices continuing to lead the way.
On balance, our composite positioning remains somewhat defensive, with one dial in a Positive position but two dials remaining Negative.