What’s New
Major equity indices have quicky recovered from first quarter losses – despite little progress in resolving the conflict with Iran and the fact that the Strait of Hormuz remains effectively closed to tanker traffic. Even the oil futures market is reflecting optimism of a return to more normal conditions in the months ahead with October 2026 light crude contracts trading under $85 a barrel.
The US economy has displayed a similar level of resiliency.
Data releases last month were generally favorable, and the Q1 earnings reporting season is off to a good start. The March US non-farm payrolls report featured a gain of 178,000 jobs more than offsetting February’s decline of 133,000. Consumer spending also remained strong as retail sales grew at a healthy rate even after backing out gasoline sales which surged due to higher prices paid at the pump. There are some signs of consumer unease with the University of Michigan’s Consumer Sentiment Index reaching a new all-time low.
Our Perspective
Financial markets have once again proven their resiliency in the face of geopolitical uncertainty and disruption. While it is tempting to try and time markets around such events, history has proven time and time again that it is a losing battle, even with perfect foresight. Who would have predicted the S&P 500 would rise to all-time highs while Iran and US conducted simultaneous naval blockades in the Persian Gulf?
While expectations of a positive near-term resolution to current geopolitical issues may prove correct, it is important to acknowledge that risks of an extended period of volatility and higher energy prices cannot be ruled out. Low real wage growth means that the US consumer is not well positioned for sustained high energy prices and more discretionary spending could start to get crowded out.
We believe a measured approach to risk taking makes sense in this environment.
Our View
Stock Market
The S&P 500 completely erased March’s sell-off and in the process reached a new all-time high during the month of April.
Bond Market
Interest rates ended the month little changed across the yield curve. Sticky inflation and geopolitical uncertainty means the futures market is now pricing in no cuts to the Fed Funds rate for the remainder of 2026.
Featured Asset Class
Crude oil prices have remained elevated throughout the month. However, the futures market is anticipating steadily lower prices in the months ahead consistent with optimism seen elsewhere in the financial markets.
Themes Driving Markets
Energy Volatility
The final month of the quarter saw a substantial spike in oil prices following the US attack on Iran. Of particular note was the closure of the Strait of Hormuz. This strait is a vital shipping route, handling ~26% of the world’s maritime oil trade and ~20% of global liquefied natural gas (LNG). While the headlines are alarming and rapidly changing, the impact on the US economy is nuanced. The shale revolution has fundamentally changed America's energy position, and the Fed's preferred inflation gauge strips out energy prices entirely. Given limited worker bargaining power, higher energy prices are likely to act as a tax on economic growth rather than a spark that starts an inflation spiral.
Tariffs
A year after 'Liberation Day,' tariffs remain a fluid policy variables facing businesses and investors. So far, the outcomes have been far more benign than many feared, with no meaningful spike in inflation and companies still growing margins. The Supreme Court's invalidation of the IEEPA tariffs was a landmark ruling, but the administration still has many significant tools at its disposal to implement tariffs far above what has been seen in the post-WWII era.
Market Volatility
The start of the year brought a stark reminder that markets do not move in straight lines. Equity volatility picked up meaningfully, with software stocks experiencing their worst relative drawdown since the dot-com era. Geopolitical uncertainty further weighed on the broad market in the final month of the quarter. Yet beneath the surface, several stabilizing forces were at work: investment-grade and high-yield credit spreads were resilient, the dollar reaffirmed its safe-haven status, and the scale of the broad equity drawdown remained well within historical norms.
Your 2026 tax bill isn't set in stone... yet.
With 2025 tax season behind us, now is the moment to shift from looking back to planning ahead. The most effective tax outcomes rarely come from a December scramble.
They come from decisions made over the full year. Roth conversions, charitable giving strategies, loss harvesting in volatile markets, and the timing of income or deductions all carry more weight when there's runway to execute.
Source: Wall Street Journal.
All investments contain risk and may lose value. This material contains the opinions of Manning & Napier, which are subject to change based on evolving market and economic conditions. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.
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