Built on Resilience

As we approach Memorial Day weekend, a time to honor and remember those who have served our nation, it also offers an opportunity to reflect on the principles that continue to guide it.  As President Harry S. Truman once noted, “America was built on courage, on imagination and an unbeatable determination to do the job at hand.” Those same qualities continue to shape the economy and market landscape today. Year-to-date performance has been supported by resilient growth, even as geopolitical tensions continue to cloud the outlook. For investors who stayed the course through March’s volatility, April was a powerful reminder that trying to time the market can mean missing its best days.

Last week, the Nasdaq Composite and Dow Jones Industrial Average edged lower, declining -0.08% and -0.11%, respectively, while the S&P 500 posted a modest gain of 0.17%. Technology stocks fueled the S&P 500’s climb to its first ever close above 7500 on Thursday. However, sentiment weakened into the end of the week, as a Friday sell-off was driven by an uptick in benchmark yields, rising energy prices, and a reacceleration in inflation concerns. The 10-year U.S. Treasury yield jumped to 4.6%, the highest since February 2025 and its biggest one-day jump in more than a year as futures markets priced in the possibility of a Federal Reserve (Fed) rate hike this year. The 30-year Treasury yield rose to 5.15%, its highest closing level since 2007.

While much of the focus surrounding the April CPI report centered on the impact of the U.S.–Iran conflict on energy prices, attention also shifted to a notable uptick in shelter inflation. Headline CPI rose 3.8% year-over-year, while core CPI increased 2.8%. Shelter inflation, while still relatively moderate at 3.3% year-over-year, climbed 0.6% month-over-month—double the pace seen in March—highlighting persistent underlying pressures.

Investors are likely curious about the impressive rise in the stock market year-to-date despite higher oil prices, rising inflation, and ongoing geopolitical uncertainty. Notably, the S&P 500 is up over 8% this year and an impressive 17% since its March 30 lows, moves that may seem surprising to some. Let’s take a closer look at a few of the key factors driving markets higher.

One component of investor optimism likely stems from expectations embedded in the WTI oil futures curve, which points to prices modestly above $80 by year-end. This outlook appears to reflect hopes for some resolution to the ongoing conflict in Iran, as a prolonged escalation would likely be unfavorable for all parties involved, particularly with midterm elections approaching in November. This still remains the biggest risk to the macro picture as markets have been tolerant of the headlines but a more serious challenge to this optimism could lead to a significant repricing.

Stocks aren’t the only thing that rebounded in April. The labor market remains resilient, with U.S. employers adding a better-than-expected 115,000 new jobs during the month, well ahead of the 55,000 forecast, while the unemployment rate held at 4.3%. If the labor market continues to operate in a “low hire, low fire” environment, stable incomes should help support higher consumer spending. U.S. retail sales rose 1.7% in March, following an upwardly revised 0.7% gain in the month prior. While much of the increase was driven by higher gasoline prices, spending remained solid across several other categories.

Likely the most significant factor helping to offset investor uncertainty is the strength of corporate earnings, which continue to move higher. With roughly 90% of S&P 500 companies having reported first-quarter results, earnings have come in well above expectations. Analysts had projected 13.1% year-over-year growth, but actual results have reached a notably stronger 27.7%, marking the highest growth rate since the fourth quarter of 2021. Unlike that earlier period, the current market rally has been driven primarily by improving near-term earnings expectations. Within the index, upward revisions have been concentrated in companies benefiting from increased AI-related capital expenditures and higher energy prices.

Headline performance has been heavily concentrated among hyperscalers and companies leveraged to the global AI trade. Through Thursday, the S&P 500 had returned 10% year-to-date, with TMT (Information Technology and Communication Services, along with Amazon and Tesla) accounting for approximately 85% of that gain. By comparison, the S&P 500 excluding TMT returned just 3% over the same period. NVIDIA alone, which represents roughly 9% of the index by market capitalization, has contributed nearly 20% of the total year-to-date return. 2026 was poised to be the year of the S&P 493 catching the Mag 7 on earnings growth, but that has yet to be seen.

Wednesday marked the end of an era, as Jerome Powell’s eight-year tenure as Federal Reserve Chair came to a close. The Senate confirmed former Fed Governor Kevin Warsh as the new Chair, ushering in a new phase for U.S. monetary policy. Warsh, a Trump nominee, has emphasized the importance of central bank independence while signaling a desire to build consensus around rate policy amid ongoing inflation pressures, a tight labor market, and geopolitical uncertainty. Warsh assumes leadership with the Fed funds rate at 3.75%, and current FedWatch probabilities suggest a roughly 45% chance that rates remain unchanged this year, with the likelihood of additional tightening incrementally rising. While new Fed chairs often step into periods of uncertainty, Warsh faces an added challenge, as the FOMC is currently experiencing its highest level of internal dissent since 1992.

President Trump, along with a delegation of CEOs from several of the largest U.S. companies, traveled to China this week to meet with President Xi. While no major economic agreements were announced, both sides emphasized the importance of maintaining open access through the Strait of Hormuz.

Investor appetite for growth and innovation remained on full display, as chipmaker Cerebras Systems delivered a highly anticipated initial public offering. Shares priced well above expectations and surged nearly 70% on their Nasdaq debut, underscoring strong demand for companies tied to next-generation technologies and infrastructure. Cerebras appears to have timed its offering effectively, capitalizing on the recent strength in semiconductor and technology-related segments that have supported broader equity markets. Although the stock pulled back from its intraday highs on Friday, the strength of the debut highlights continued investor enthusiasm.

Heading into Memorial Day weekend, investors will remain focused on the ongoing U.S.–Iran conflict and attention will also turn to a busy stretch of earnings, with key reports from Home Depot, Target, Walmart, Palo Alto Networks, Intuit, and the week’s headline event—NVIDIA on Wednesday. Key macro catalysts include the FOMC minutes on Wednesday, the Philadelphia Fed index on Thursday, and several Fed speaker appearances throughout the week.

Links to previously published commentaries can be found at benjaminfedwards.com/Latest Investment Insights/Market Commentary/Market