The S&P 500 closed out April with a gain of more than 10%, marking its best month in nearly six years. Despite a temporary tumble in March, the index hit seven record highs as robust corporate earnings and enthusiasm for artificial intelligence outweighed the impact of a persistent energy shock. The tech-heavy Nasdaq led the charge with a 15% surge, reflecting a market that is largely looking past the conflict in the Middle East to focus on resilient corporate fundamentals.
Energy and bonds under pressure
While equities climbed, the bond and oil markets remained volatile due to the effective closure of the Strait of Hormuz. Oil prices have jumped more than 50% since the war with Iran began, with Brent crude spiking above $125 a barrel in late April. This energy pressure is filtering through to the U.S. economy, where national gas prices reached $4.30 a gallon. In response to inflation concerns, the 10-year Treasury yield hit 4.4%, a peak not seen since March, which pushed 30-year fixed mortgage rates up to 6.3%.
Wait-and-see on supply. Goldman Sachs raised its long-term Brent forecast to $90 a barrel, citing record inventory draws of up to 12 million barrels per day. Although Iran recently proposed a deal to reopen the waterway, President Donald Trump scrapped plans for immediate high-level negotiations in Pakistan, leaving the timeline for restored supply uncertain. Analysts at Invesco noted that until flows normalize, $80 per barrel likely serves as a floor for prices.
Warning signs of complacency
The disconnect between record stock prices and economic reality has drawn warnings from regulators and veteran observers. Bank of England Deputy Governor Sarah Breeden noted that asset prices are at all-time highs despite significant global risks, including a potential "private credit crunch." Economist Gary Shilling also signaled trouble, suggesting the S&P 500 could face a 20% to 30% correction by year-end as consumer savings rates hit their lowest levels since 2022.
- The Shiller CAPE ratio is at its highest level since the dot-com era.
- Real disposable income growth slowed to a 0.4% yearly pace in March.
- The NBA has asked the CFTC to tighten restrictions on prediction markets to protect game integrity.
The focus now shifts to the labor market to see if high interest rates are finally cooling the economy. The official April nonfarm payrolls report lands May 8.
