April was a powerful rebound month for markets, with stocks shaking off the weakness from late March and posting their strongest monthly gains since 2020. The rally was fueled by three major forces: renewed optimism around artificial intelligence, better-than-feared corporate earnings, and hopes that the Middle East conflict would not create a prolonged global energy shock. The S&P 500 rose more than 10% for the month, while the Nasdaq gained more than 15%, with both indexes finishing April at record highs.
The month began with investors focused heavily on the Strait of Hormuz and the risk that a prolonged disruption to oil shipments could push inflation higher and pressure consumers. Early in April, crude oil prices remained extremely volatile, with Brent trading near or above $100 per barrel as markets reacted to developments in the region. As the month progressed, however, investors became more willing to look past the geopolitical headlines, especially as the U.S. economy continued to show resilience and corporate earnings came in better than expected.
Technology and AI-related companies were the clear market leaders. Earnings season, which accelerated later in April, helped separate companies showing real AI-driven revenue growth from those facing concerns about excessive capital spending. Investors rewarded companies tied to data centers, electricity demand, broader AI infrastructure, and semiconductors, with memory chipmakers Micron Technology and SanDisk, along with CPU producers AMD and Intel, ranking among the strongest performers. At the same time, the market became more selective, with some large technology companies, including Meta, parent of Facebook, and Microsoft, pressured by questions around how they will monetize outsized capital expenditures. That distinction is important: the AI theme remains powerful, but investors are increasingly asking whether the spending will translate into durable profits.
The broader U.S. economy also held up better than many feared. Boosted in part by AI-related business spending, first-quarter real GDP grew at a 2.0% annualized pace, an improvement from 0.5% growth in the fourth quarter of 2025. The labor market remained solid as well, with March payrolls rising by 178,000 and the unemployment rate little changed at 4.3%. Consumer spending remained an important support for the economy, even as higher gas prices and elevated borrowing costs continued to weigh on sentiment.
Inflation, however, remains the main complication. March CPI rose 0.9% for the month and 3.3% from a year earlier, a reminder that higher energy prices can quickly flow through to consumer prices, with the core CPI rate ticking higher to 2.6% year-over-year. This is one reason the Federal Reserve stayed cautious at its April meeting. The Fed held interest rates steady, but the meeting drew attention because of the unusually high number of dissenting votes and because it marked Jerome Powell’s final meeting as Fed Chair. Markets may have rallied in April, but the Fed is still balancing resilient growth against sticky inflation that has not fully returned to target.
The consumer also deserves close attention. Retail sales were stronger than expected, suggesting households are still spending despite higher gasoline prices and interest rates. But that strength should not be taken for granted. If energy prices remain elevated, the squeeze on lower- and middle-income consumers could become more visible in the months ahead.
For the month, the message from markets was clear: investors are willing to look through geopolitical risk when earnings are strong, economic growth is steady, and the AI investment cycle remains intact. Still, April’s rally also leaves less room for disappointment. In May, investors will be watching for signs that oil prices are stabilizing, inflation is cooling after the March spike, earnings guidance remains supportive, and the Fed can stay patient under its expected next chair, Kevin Warsh, without allowing inflation expectations to drift higher.
We remain optimistic but recognize that the margin of error has narrowed. After shifting internationally last year, we are becoming more selective in our approach—maintaining exposure to markets with greater technology exposure while becoming more cautious in areas under economic stress from higher oil prices. We are also leaning into the possibility that stronger U.S. fundamentals may once again support relative performance in the broader domestic market.