From the desks of Stanley Katz & Lauren Madera
IN HONOR OF ALIEN DAY, CONSIDER SEEING “PROJECT HAIL MARY!”
Markets turned in a mixed performance for the week (DJIA: -0.44%, S&P 500: +0.55%, Nasdaq: +1.50%) as ongoing uncertainty surrounding the U.S.-Iran conflict competed with a string of generally encouraging earnings results. Hopes for near-term de-escalation in the Middle East faded early in the week, initially pressuring equity performance. Stocks rebounded mid-week after a ceasefire extension helped ease concerns. Earnings season also provided a meaningful offset. According to T. Rowe Price, with nearly 20% of S&P 500 companies having reported, 84% beat estimates, with a blended year-over-year earnings growth rate of 15.1%. If this trend persists, we are on pace for a sixth consecutive quarter of double-digit growth. On the economic front, the headline retail sales number for March — up 1.7%, the strongest monthly gain since early 2023 — looked impressive until you examined the composition. A 15.5% surge in gas station sales accounted for the bulk of the increase, reflecting higher prices at the pump rather than a surge in consumer demand. Consumer sentiment confirmed the tension, slipping to 49.8 in April’s final reading. Projected year-ahead inflation expectations surged to 4.7% and long-run expectations climbed to 3.5%, the highest level since October 2025. With 80% of S&P 500 companies still to report and a Federal Reserve meeting on April 29th, the next several days may go a long way toward shaping the market’s direction for the weeks ahead.
BlackRock’s April “Student of the Market” is a useful companion piece for moments like this one, offering a collection of charts that together make a historically grounded case for staying invested through uncertainty. A few of the most relevant data points stand out.
- Geopolitical shocks: History shows that markets have absorbed events far more severe than the current conflict with a resilience that surprises most investors in the moment.
- Drawdowns: With the S&P 500’s year-to-date peak drawdown at roughly 9%, BlackRock’s data dating back to 1926 reveals that U.S. stocks have never finished a calendar year in negative territory when the maximum intra-year drawdown was less than 15%.
- Earnings: The first quarter of 2026 produced a rare and historically significant divergence. Earnings estimates rose sharply even as stock returns were negative, a combination that has historically been followed by strong forward returns.
- Diversification: International stocks have been leading U.S. markets in 2026. BlackRock’s data suggests that, when U.S. returns have been below 6%, international stocks have outperformed 95% of the time over rolling 10-year periods.
- Midterm elections: Historically, the first three quarters of midterm years have been the weakest, followed by a notably strong fourth quarter.
Taken together, the charts tell a consistent story — one worth reading in full.
This week’s Schwab “On Investing” podcast, titled “Debt, Deficits & the Fed’s Next Move,” offers a window into what investors are actually asking right now. Liz Ann Sonders and Collin Martin open by describing what they hear most on the road, and the answers are instructive. The U.S. deficit and national debt top the list of inquiries:
Will the dollar lose its reserve currency status? Could China dump its Treasuries? Are we heading for a debt default?
Sonders and Martin address each with characteristic directness.
No replacement exists for the dollar as the world’s reserve currency. China’s official Treasury holdings have been steady for over a decade. And a U.S. default is not their base case.
Martin adds an important nuance on the fiscal picture. Despite the scale of debt issuance, no reliable statistical relationship has ever been established between deficit levels and the path of long-term Treasury yields.
On the Fed, the conversation turns to Kevin Warsh’s upcoming confirmation hearings and what they may reveal about his views on inflation, Fed independence, and the size of the Fed’s balance sheet — all of which carry implications for bond markets. The discussion closes with a thoughtful examination of the classic 60/40 portfolio and whether bonds still provide the diversification benefits investors have historically relied upon. Sonders argues that the answer depends heavily on which era you are in (and that we have clearly left the so-called “Great Moderation” behind). The full episode script is worth a read.
Below are links to a number of third-party research reports that we have read and analyzed over the past week. We hope you will find the information interesting, useful, and worthwhile.
BlackRock:
Schwab:
Argus:
American Century:
KKR:
Stanley Katz & Lauren Madera, Financial Advisors
ClientFirst Financial Strategies, Inc.
937-293-5500
Source for weekly stock market returns: Barron’s.
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