Market Commentary - April 2026

Overview

April was defined by markets' shifting assessment of whether the Middle East conflict would de-escalate quickly or evolve into a longer-lasting energy shock with broader macroeconomic consequences. As the month progressed, repeated setbacks in negotiations, renewed pressure on Iran and continued oil- price sensitivity kept headline volatility elevated even as rates remained relatively contained and risk assets rallied. By the end of April, WTI crude oil climbed to $105.07 from $101.38, and the market's focus shifted toward the possibility that higher energy prices would increasingly bleed into inflation while weighing on consumption and growth. The U.S. dollar weakened by 1.91% during the month, as measured by the U.S. Dollar Index, which fell to 98.06 from 99.96. (Figure 1) The S&P 500 Index returned 10.49% versus 9.73% for non-U.S. equities, as measured by the MSCI All Country World Index ex U.S. The Bloomberg US Aggregate Bond Index, the benchmark fixed-income index, returned 0.11% as U.S. Treasury yields broadly rose across the curve. Yields on the two-, five- and 10-year notes rose 8 basis points (bps), 7 bps and 5 bps, respectively, and the 30-year Treasury bond was up 6 bps.

The Federal Open Market Committee Meeting left the federal funds rate unchanged at 3.50% to 3.75% at its April meeting. In Jerome H. Powell's final press conference as Federal Reserve chair, he noted the "solid pace" of economic growth, a low unemployment rate and persistent inflation from increased energy prices. Chair Powell said inflation remained elevated, even when excluding food and energy, which he attributed "largely" to tariffs on goods. Looking to the future, he reiterated the importance of Fed independence and stated that he will remain on as a governor - his term will end in January 2028. At month's end, market expectations were for the federal funds rate to remain unchanged for the rest of the year, according to Bloomberg's World Interest Rate Probability function.

The U.S. economy added 115,000 jobs month-over-month (MoM) in April, according to the nonfarm payrolls report, beating consensus estimates of 65,000. The previous two months were revised lower by 16,000 jobs, bringing the three- month moving average of private payroll gains to 48,000. The U-3 unemployment rate was unchanged MoM at 4.3%. The ISM Manufacturing PMI was also flat at 52.7, below consensus estimates of 53.2. (A PMI number above 50 signals expansion; a number below 50 signals contraction.) The ISM Services PMI decreased to 53.6 from 54.0, slightly below consensus estimates. The March Consumer Price Index, released in April, came in at 3.3% year-over-year, up from 2.4% in February and slightly lower than consensus estimates of 3.4%. Elevated energy prices due to the Iran war contributed to the rise in inflation.

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