Market Notebook

PRICE ACTION:
Equity prices, as measured by the ticker SPY, closed higher while bond prices, as measured by the ticker BND, closed lower over the last week.

SPY     +0.94%
BND     -0.35%

TECHNICAL ANALYSIS:
SPY price appears to be trending higher.

BND price appears to be trending lower.

SENTIMENT:
BlackRock noted this week that the AI mega-force is shaping up stronger than envisaged. Previous market skepticism over AI, that major players were spending heavily but not making money, is dissipating and turning into belief, as AI adoption rises and revenue growth accelerates.  The mood among equity investors has shifted decisively. Investors are looking past the war in Iran, as growth risks appear manageable, AI remains a powerful tailwind, and earnings have held up.  Beneath the surface, however, the reaction to individual earnings reports reveals a market with elevated expectations, rewarding AI spending that shows near-term monetization and punishing spending without clear incremental returns.

ECONOMY AND FUNDAMENTALS:
The week was defined by two simultaneous narratives: a historic earnings deluge and the most consequential Federal Reserve meeting in years. Both delivered plenty of drama.

 On the earnings front, companies reporting this week accounted for more than two-fifths of the S&P 500’s total market capitalization. Analysts now see aggregate first-quarter earnings growth of 27.8% year-on-year, an 11.7-percentage-point increase from just a week ago, and the biggest earnings growth since Q4 2021.  The marquee event was Wednesday evening, when four of the Magnificent Seven reported simultaneously. Alphabet’s first-quarter profit soared 81% as Google Cloud revenue grew 63% to $20 billion, well ahead of estimates.  Microsoft reported adjusted EPS of $4.27, beating consensus by $0.21, with Azure cloud growth in line with guidance.  Meta beat on earnings but fell roughly 7% after raising its full-year capital expenditure guidance to between $125 billion and $145 billion, up from a prior range of $115 to $135 billion, citing higher component pricing tied to the Iran conflict.  Apple closed out the mega-cap reporting cycle Thursday with a blowout quarter, services revenue hitting a record $30.98 billion, sending the Nasdaq to its historic 25,000 milestone on Friday.
 
 The Federal Reserve meeting on April 29 was, in the words of Chair Powell, his last press conference as chair, and it was anything but routine. The FOMC voted 8-4 to hold the benchmark funds rate steady at 3.5% to 3.75%, the first time four members had dissented at a single meeting since October 1992.  While Governor Stephen Miran again dissented in favor of a rate cut, Fed Presidents Beth Hammack of Cleveland, Neel Kashkari of Minneapolis, and Lorie Logan of Dallas dissented against the inclusion of an easing bias in the statement, effectively signaling that the next move may be a hike rather than a cut.  Powell confirmed he will step aside as chair when Kevin Warsh is installed, but will remain on the Board of Governors for an indefinite period, citing the ongoing DOJ renovation investigation and his desire to protect Fed independence.  The Fed’s fractured internal posture hands Warsh a deeply divided institution to lead, one where three regional bank presidents are publicly signaling caution about the path of rates.
 
 The economic data reinforced that difficult backdrop. The Commerce Department’s initial Q1 2026 GDP estimate showed the economy expanding at a 2.0% annualized rate, an acceleration from Q4’s 0.5%, supported by consumer spending and AI-driven investment. However, inflation pressures intensified markedly, with the PCE price index rising to 4.5% and core PCE reaching 4.3%, well above the Fed’s 2% target and the hottest readings in years. The combination of solid growth and surging inflation puts the Federal Reserve, and its incoming chair, in one of the most challenging policy positions in a generation.

All the best during the week ahead!

Disclaimer: Nothing in this discussion should be considered investment advice. The content of this discussion is strictly my personal opinion and subject to change at a moment’s notice. Investment advice can only be provided to you by your investment professional and not by a general market discussion such as this one. If you wish to speak with an investment advisor, contact us. We can probably help.