Doc’s Economic Insights

April 2026

US stock prices declined during the first quarter, largely due to geo-political issues.  January began with stocks trending higher.  The news that the US had ousted Venezuelan President Maduro triggered a sharp rally in Energy stocks on January 5.  On January 6, the rally spread to other sectors that might benefit from rebuilding Venezuela.  The two-day rally pushed the S&P 500 to a record high, up 1.5% for the month overall.  Stocks traded in a narrow range for several sessions before tumbling on January 20.  The S&P 500 declined 2% on the 20th after President Trump threatened tariffs of 10% on eight European countries opposed to his desire to acquire Greenland.  Stocks began to recover the next day, after President Trump backed off his tariff threats.  US stocks completed their recovery on January 26th, as investors bid up technology shares in anticipation of strong earnings reports.  The S&P 500 gained 1.45% for the month of January overall.

February’s market activity was driven largely by shifts in investor expectations regarding the impact of artificial intelligence (AI).  The month began with leading technology stocks under pressure due to concerns about high levels of AI spending.  By the close on February 5, the S&P 500 was down more than 2.5% for the month overall.  Bargain hunters stepped in on February 6, triggering a sharp rally in technology stocks and a gain of more than 2.2% in the S&P 500.  After trading in a narrow band for multiple sessions, the S&P 500 declined 1.56% on February 12.  A major driver of the selloff was concern that AI would make firms in industries such as wealth management and shipping obsolete.  This theme hurt valuations in a variety of industries during several successive trading sessions but had a limited impact on the market overall.  On February 24, computer chip manufacturer AMD led a strong market rally after it reported a deal to sell $100 billion worth of advanced processors to Meta.  The stock market continued its rise on February 25, as investors bid up Nvidia in anticipation of strong earnings to be released after the close.  Although Nvidia delivered better than expected results, they were not enough to satisfy investors.  Nvidia declined 5% on February 26, pushing the S&P 500 to a loss of 0.5%.  The S&P 500 declined -0.76% for the month of February overall.

March was all about Iran.  The US market’s initial reaction to the US and Israel launching a campaign to neutralize Iran on February 28 was mildly positive, with Energy stocks pushing the S&P 500 to a modest gain on March 2.  However, stocks soon began to tumble as Iran was able to sustain a blockade of the Strait of Hormuz and oil prices began to climb.  By the March 30 close, the S&P 500 Index was down more than 7.5% for the month overall.  On March 31, stocks staged a furious rally on hopes that talks between the US and Iran might soon yield an agreement to reopen the Strait.  However, the rally was not nearly enough to erase all the month’s losses.  The S&P 500 declined -4.98% for the month of March and -4.33% for the first quarter overall.

Although we remain optimistic about the stock markets’ long-term prospects, stock prices are likely to remain under pressure near-term due to the ongoing blockade of the Strait of Hormuz and its impact on oil prices.  The surge in oil prices has also raised concerns about inflation, pushing bond yields higher and making it unlikely that the Federal Reserve will cut the Federal Funds rate before September.

It should be noted that some segments of the market are likely to hold up better than others.  Stock valuations outside of the technology sector continue to be attractive.  Market volatility also leads investors to rotate their portfolios toward stable stocks.  For further details, please see below.

 

 

The Economy:

• Consumer spending remains strong, providing near-term support for the economy.
• The US unemployment rate appears to have stabilized around 4.4%.
• Monetary policy overall remains supportive.
• Corporate earnings growth for 2026 is currently expected to exceed 10%.

 

Investment Valuations & Rotation Toward Stability:

• Investors continue to reassess the valuations of technology shares.  Many stocks outside this sector have attractive valuations.  This is a great environment for active stock managers, particularly ones that look for stocks with reasonable valuations.
• In volatile markets, investors tend to rotate toward stocks that have provided more stable returns in the past.  Stocks that possess economic moats tend to have more stable returns and often benefit in these environments.

 

This report has been generated from information that Arbor Financial believes to be reliable and accurate. We do not represent or warrant the accuracy or completeness of the information contained in this report. As such, all calculations, estimates, and opinions included in this report constitute our best judgment as of this date and may be subject to change.  Past performance does not guarantee future results.