F.N.B. Wealth Management Fast Five

1. What happened in markets during April?

The repricing of equities in March (sell off) snapped back aggressively in April with the best month for U.S. equities since 2020. First quarter earnings for U.S. companies added some context and support to the rebound (see below), but April was also a reminder that while the geopolitical environment, global economy and global equity markets inform each other, they do not always harmonize. With a resilient U.S. economy in place, equity markets are taking the long view of the war in Iran, which they are treating as a short-term geopolitical issue. The optimism in equity markets drove the S&P 500 up 10.5% to a new all-time high, while the Dow Jones Industrial Average was +7.2%, the tech heavy Nasdaq was +15.3% and the Russell U.S. Small Cap Index was +12.3%. International equity markets were also positive during the month, with the MSCI EAFE Index (developed markets) +7.6% and the MSCI Emerging Markets Index +14.7%, illustrating that AI spending and earnings growth is not just a U.S. phenomenon.

U.S. Treasuries yields climbed (Treasuries sold off) again as the bond market continues to wrestle with stable economic data that may be challenged by inflation risks and widening government deficits. The first two items are keeping the Federal Reserve on the sidelines as well. The selling wasn’t as pronounced as March, but the two-year yield did move higher by 10 basis points (bps) to 3.9%, and the 10-year U.S. Treasury yield was also up 10 bps to 4.4%. As of the end of April, Fed Funds Futures traders were no longer pricing in a Federal Reserve rate cut this year.

Oil and gas dominated commodity trading again in April as West Texas Intermediate was +3.6% and U.S. gasoline was +8.1%. Elsewhere in the commodity complex, natural gas was -4.1%, gold -1.1% and silver -1.9%, while copper was +5.3%.

The U.S. dollar declined 1.86% due to similar concerns that led to the selling in Treasuries namely, inflation risks and widening government deficits.

2. Why were U.S. equity markets at or near their all-time highs in April?

The answer is simple: corporate earnings are driving stock prices. As of the end of April, approximately 60% of S&P 500 companies had reported their first quarter earnings. Going into the earnings season, consensus expectations amongst Wall Street analysts were for a rather robust 12.5% earnings growth rate for the S&P 500. The results as of April 30, however, have outpaced even the most optimistic expectations, at a 25.9% earnings growth rate. Based on this pace, the first quarter will be the sixth quarter in a row for double-digit earnings growth for the S&P 500 Index. The technology and communications sector, particularly the so-called “Magnificent 7,” had a lot to do with that, as spending on AI continued at a record pace, but analysts are expecting earnings to broaden into other sectors and industries throughout the remainder of 2026.

3. Are central banks facing the same risks to monetary policy as they did in 2022?

We don’t think so. As we have discussed previously, global monetary policy has been desynchronized since the start of 2023. However, in 2022 there was a very consistent course of action for global central banks: raise rates to combat inflation stemming from the supply/demand imbalances created, in part, because of the war in Ukraine. There was a long list of major central bank meetings in April, including the U.S. Federal Reserve, the Bank of England (BoE), the Bank of Japan (BoJ), the Bank of Canada and the European Central Bank (ECB). Each of those central banks chose to hold rates steady due to the uncertainties related to the war, although most of them, including the U.S,. had split votes. In fact, the Federal Open Market Committee (FOMC) had four dissenting votes for the first time since 1992, and most of the debate was around whether monetary policy should have an easing bias or a tilt towards tightening. Economies that are net importers of energy (ECB, BoE and BoJ) are increasingly more likely to raise rates (tighten) as early as June to combat inflation in their economies because of global energy pressures (supply constrained inflation). Although there are some similarities to 2022, the world is not dealing with excess liquidity from a pandemic like it was in 2021 and early 2022. This means global synchronization around tighter monetary policy isn’t likely to develop, and if it does, it will probably reach lower interest rate levels and be much shorter in duration.

4. Why are economists saying the U.S. economy is resilient?

Economists typically look at broad economic measures like growth of gross domestic product (GDP) when measuring the health of an economy. The initial U.S. Q1 GDP rose +2.0% annualized as consumer spending was stronger than expected (+1.6%) during the quarter and business spending on structures and equipment (mostly AI capex) increased 10.4%, which was the fastest pace in nearly three years. Final sales to private domestic purchasers, a measure closely watched by economists, were +2.5%. Additional evidence of the U.S. consumers’ ability to weather the recent energy pressures showed up in headline retail sales that increased +1.7% in March, with 12 of the 13 categories in the index posting gains. Of course, sales at gas stations were up 15% due to the spike in gas prices, but it looks like higher tax refunds are helping to offset higher energy costs for now.

From a labor market perspective, weekly initial unemployment claims dropped to 189,000 for the last week of April. That was the lowest weekly jobless claims number since 1969. The low fire environment is healthy for the U.S. economy. In fact, the Atlanta Fed’s GDPNow forecasting model was expecting a 3.5% annualized growth rate for U.S. GDP in 2026 as of April 30. Real GDP, means nominal is like 6.5%. Long-run average is 350K in claims.

5. What is the Chief Investment Office monitoring in May?

We are watching the following:

1. The war in Iran will likely become the single largest market variable in May following the conclusion of Q1 earnings reporting. The duration of the conflict will determine the amount of global economic impact and inflation due to the corresponding impact on energy prices.
2. President Trump is scheduled to meet with China’s President Xi on May 14, with multiple geopolitical situations to be considered by the leaders of the world’s two largest economies.
3. The FOMC does not meet again until June, but we will be watching for Kevin Warsh’s confirmation as the new Chair of the Federal Reserve Board.
4. Our equity market experts will continue to evaluate company earnings as the remaining 40% of the S&P 500 companies report first quarter earnings throughout the month of May.

Charts of the Month

Is AI spending really enough to impact earnings?

As noted above, first quarter earnings are strong and largely driven by AI spending. As the chart illustrates, five of the largest companies in the World (often referred to as the Hyperscalers) are expecting to spend almost $800 billion in the next 12 months. From a historical perspective, the U.S. Government’s Troubled Asset Relief Program (TARP) that was created to stabilize the U.S. financial system only reached $443.5 billion in all its phases combined. This means there are now five U.S. companies spending approximately 80% more than what had previously been an economic rescue package for the U.S. economy. So, yes, the spending on AI can absolutely impact earnings. Additionally, the productivity gains from AI will also help to expand margins for a lot of companies.

Hyperscaler Projected Capex Spending Nears $800 Billion

The Strait of Hormuz closure comes at a cost:

Global oil prices, as measured by Brent crude oil, have gone from $71.61/barrel on February 27, 2026, to $110.40/barrel on April 30, 2026, largely because commercial shipping lanes through the Strait of Hormuz have essentially been closed during the war. Prior to the start of the war, approximately 135 ships per day passed through the Strait. As of the end of April, the daily passage was essential zero, which means there were at least 1,500 ships stuck in the Persian Gulf at the end of the month. Unfortunately, this is also driving up jet fuel prices around the world, as approximately 10% of the global supply of jet fuel is refined in the Middle East. This could be challenging for the summer travel season.

Tanker Vessel Crossings in the Strait of Hormuz