“
”Markets in Focus
Timely analysis of market moves and sectors of opportunity
BY MATT ORTON, CFA, AND JOEY DEL GUERCIO, CFA1, 2
Neither the standoff over the Strait of Hormuz nor this week’s US Federal Reserve meeting are expected to produce an immediate catalyst for equity markets.
So, watch for earnings to stay in the driver’s seat. Resilience across corporate America remains a clear message from this earnings season.
Investment playbook areas of focus: Beneficiaries of capital expenditures for artificial intelligence, small caps, and winners in areas with bifurcated performance (think industrials, healthcare, and emerging markets).
Deal or no deal seems like an apt framing for a market where the easy money has been made and that is now subject to the convergence of macro and micro factors. Ongoing twists in US-Iran negotiations are keeping oil risks elevated, pressuring the broader market, including developed international equities and cyclical sectors that are most exposed to higher energy prices.
Yet the more important signal is that earnings have remained resilient and guidance has generally been constructive, especially across the artificial intelligence (AI) capital expenditures beneficiaries. This has been our preferred area amid macroeconomic uncertainty. Recently, market leadership has narrowed meaningfully with semiconductors doing most of the heavy lifting. Mega-caps also have continued to push higher. This week should indicate whether this trend can continue: Roughly 50% of the S&P 500 Index by market capitalization reports results this week, including five of the Magnificent Seven, making this one of the most important weeks of the quarter for setting the market’s direction.
The US Federal Reserve (Fed) is also on deck. While no change is expected, unless the policy message shifts meaningfully, corporate fundamentals should remain the polestar for investors. Retail investor positioning is not extended despite the torrid rally, supporting continued upside and our playbook of using downside opportunistically. We continue to favor leaning into the AI complex given the positive earnings momentum and broader desensitization to geopolitical headlines. Increasingly, we’re also looking down the market capitalization spectrum to help diversify portfolios.
The Middle East remains caught in a no-man’s land – without war, without peace, and crucially for markets, without energy flows through the Strait of Hormuz.
The issue for energy markets is that balances deteriorate further each day the waterway stays closed, and buffers in many nations dependent on Middle East oil have largely been exhausted at this point. This is likely to keep energy prices higher for longer. Meanwhile, volatility across the energy complex looks likely to remain elevated as long as the standoff continues.
Fortunately, the US economy has been resilient amid higher gasoline prices and elevated uncertainty fueled by the war. Recent data showed strong employment conditions, gains in leading indicators, and healthy consumer spending.
All of this supports the Fed remaining on hold this week, potentially moving to a symmetric policy bias. which means that risks would be balanced between rate cuts and rate hikes, though the bar for hikes would be incredibly high.
There will be no dot plot out of this Fed meeting, and since Iran was already a concern at the March meeting, Fed Chair Jerome Powell is likely to repeat many of his previous messages. While that could be perceived as slightly hawkish relative to current expectations for interest rates, it looks like the roadblocks to Kevin Warsh’s confirmation as the next Fed chair have been removed, possibly putting him in place in time for Powell’s term to end on May 15. This should help contain questions over the Fed’s independence.
Additionally, Warsh’s overall tone was cautious during the Senate hearing and can hardly be said to endorse immediate rate cuts. Still, his comments about wishing to rethink the Fed’s inflation measure, shifting more to a trimmed mean measure that would exclude extreme changes in prices, is on balance slightly dovish and an indication of his early priorities.
With the Fed unlikely to be an immediate catalyst for markets, watch for earnings results to stay in the driver’s seat.
Resilience across corporate America remains one of the clearest messages from this earnings season. So far, the S&P 500 is tracking year-over-year (y/y) earnings growth of 15.1% on 10.3% revenue growth for the first quarter, with 84% of companies that have reported beating earnings per share (EPS) estimates and 81% topping revenue forecasts. Just as important, 8 of the 11 sectors are still posting y/y earnings growth, led by information technology, materials, financials, and industrials. This suggests the story is broader than a narrow mega-cap phenomenon.
Profitability is holding up even better: FactSet’s blended first-quarter net profit margin stands at 13.4% – above 13.2% in the fourth quarter, above 12.8% a year ago, and above the 5-year average of 12.3%. If it holds, this pace would mark the highest margin FactSet has recorded since 2009, and analysts still expect margins to move higher through the balance of 2026.
That durability helps explain why the market has absorbed anoisy macro and geopolitical backdrop. Put simply, this is not just a story of companies clearing a low bar. It is a story of revenues, margins, and earnings breadth holding up well enough to keep the fundamental backdrop intact.
The bar this quarter is high, but so far S&P 500 earnings have been clearing it
Source: Bloomberg, as of 4/24/2026
Mega-cap earnings are likely to be the single most important catalyst for the market this week. Over $11 trillion of market capitalization reports results after the bell on Wednesday, and many of these stocks have already been among the strongest performers off the bottom.
Flows also are likely to play an important role in determining market direction as inflows are starting to morph from a flood into a steady bid. Recently, rules-based, systematics, short-covers, commodity trade advisors (CTAs), and levered exchange-traded funds (ETFs) have all been forced buyers. Estimates show that they collectively bought more than $200 billion of US equities over the past three weeks. That looks set to change. We expect flows to remain net-positive, but to provide a more consistent bid to the market than the flood of forced buying during those three weeks. Interestingly, retail flows remain depressed and could accelerate on good earnings or opportunities to buy the dip. It’s also worth noting that the second quarter is typically a seasonally strong period for retail inflows. Looking ahead, here are three key thoughts from our playbook:
AI capex beneficiaries still have room to run. Semiconductor stocks have rallied impressively, along with other AI capex beneficiaries such as electric equipment and other data center-related companies. Semiconductors rose 18 consecutive days, the longest streak ever, leaving two-thirds of semis and hardware stocks in overbought territory. However, most of these gains have been driven by mutual funds, hedge funds, and systematic flows. We believe there is still room for retail inflows to push this group further. Bottlenecks and upside winners are likely to continue being chased, as investors continue to re-risk and diversify outside of the HALO (hard assets, low obsolescence) pre-war winners that are now more at risk due to dislocations from the Middle East. During recent meetings in Asia, Matt Orton heard unequivocal feedback from both companies and investors: Investors want exposure to the AI supply chain globally above all else. There are huge bottlenecks that could support buying dips and continuing to lean into what appears to be an extended trade. AI investment was top of mind for all policymakers with whom Matt spoke, with significant interest in rapidly expanding public-private partnerships. Additionally, with Anthropic revenues accelerating and AI‑exposed industrials delivering the strongest earnings momentum, capital has rotated decisively toward these stocks as uncertainty builds elsewhere across the market. Moreover, this isn’t just a US story nor is it confined to large caps – the AI capex beneficiaries globally and down-market cap broadly continue to benefit and could be prime candidates to consider on any future weakness.
Don’t worry about bifurcation. Bifurcation is now a defining feature of the market – whether it’s the disconnect between semiconductors and software, narrow performance within sectors like industrials, or even across the international developed or emerging market. The conflict in the Middle East is accelerating a sharp divergence in sentiment and share price performance across global markets. Earnings are reinforcing this bifurcation. The war also has led to severe dislocations and supply chain havoc that are unlikely to be resolved in the short term, even if a deal were reached imminently. Amid this dynamic, we prefer leaning into winners. Outside of tech, that means electric equipment over autos-related stocks or civil aerospace and defense in industrials; favoring biotechnology over medical devices within healthcare; or thinking about emerging markets with either commodity exposure or semiconductor manufacturing. An example of this could be Brazil or either Taiwan or South Korea over India.
Position for a small-cap summer? Our team recently published a piece with a bullish call for small-cap equities. We have been constructive on the asset class since the middle of last year but recently have hesitated to put new money to work here given the geopolitical uncertainty of the past few months. Now, however, we’re seeing strong relative performance re-assert itself: The Russell 2000® Index is back at all-time highs, outperforming the S&P 500 by nearly 4% since the lows on March 30. There are both headwinds and tailwinds, but small caps remain under-owned by investors with top- and bottom-line growth finally emerging as a fundamental support needed to drive a continuation of the relative performance cycle.
Smalls caps lead the way higher
Cumulative returns since 2/27/2026, the start of the war in Iran
Source: FactSet, as of 4/24/2026
Earnings – There is $12.6 trillion in market capitalization reporting this week across just the technology, media and telecommunications space. Mega-cap results are likely to be critical for setting the direction of the market in the near term.
Central banks – The US Federal Reserve, Bank of Canada, the European Central Bank, and the Bank of Japan all meet. All are expected to leave their respective policy rates on hold.
Inflation data – The US releases the March core Personal Consumption Expenditures (PCE) Price Index. April consumer price reports are expected from the euro-area and Tokyo.
1 Matt Orton, CFA, is Chief Market Strategist at Raymond James Investment Management. Joey Del Guercio, CFA, is Research Analyst at Raymond James Investment Management.
2 Unless otherwise indicated, all data cited is sourced from Bloomberg as of April 24, 2026.
Risk Information:
Investing involves risk, including risk of loss.
Diversification does not ensure a profit or guarantee against loss.
Disclosures:
Any forecasts, figures, opinions, or investment techniques and strategies set out are for informational purposes only. There is no assurance any estimate, forecast or projection will be realized.
Index or benchmark performance presented in this document does not reflect the deduction of advisory fees, transaction charges, or other expenses, which would reduce performance. Indexes are unmanaged. It is not possible to invest directly in an index. Any investor who attempts to mimic the performance of an index would incur fees and expenses that would reduce
return.
This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature, or other purpose in any jurisdiction, nor is it a commitment from Raymond James Investment Management or any of its affiliates to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical, and for illustration purposes only. This material does not contain sufficient information to support an investment decision, and you should not rely on it in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and make their own determinations together with their own professionals in those fields. Any forecasts, figures, opinions, or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions, and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements, and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.
The views and opinions expressed are not necessarily those of the broker/dealer or any affiliates. Nothing discussed or suggested should be construed as permission to supersede or circumvent any broker/dealer policies, procedures, rules, and guidelines.
Sector investments are companies engaged in business related to a specific sector. They are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification.
Investing in small cap stocks generally involves greater risks, and therefore, may not be appropriate for every investor. The prices of small company stocks may be subject to more volatility than those of large company stocks.
International investing presents specific risks, such as currency fluctuations, differences in financial accounting standards, and potential political and economic instability. These risks are further accentuated in emerging market countries where risks can also include possible economic dependency on revenues from particular commodities or on international aid or development assistance, currency transfer restrictions, and liquidity risks related to lower trading volumes.
Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments.
Links are provided for informational purposes only.
Definitions
Consumer Price Index / CPI – Measures the change in prices paid by consumers for goods and services. The U.S. Bureau of Labor Statistics bases the index on prices of food, clothing, shelter, fuels, transportation, doctors’ and dentists’ services, drugs, and other goods and services that people buy for day-to-day living. Prices are collected each month in 75 urban areas across the country from about 6,000 households and 22,000 retailers.
Core PCE, or core inflation – Officially known as the Personal Consumption Expenditures (PCE), excluding Food and Energy, Price Index, is a measure of the prices that U.S. consumers pay for goods and services, not including two categories (food and energy) where prices tend to swing up and down more dramatically and more often than other prices. Headline PCE data is the raw inflation figure reported monthly by the U.S. Department of Commerce Bureau of Economic Analysis. Core PCE data measures inflation trends and is watched closely by the U.S. Federal Reserve as it conducts monetary policy.
Indices
Bloomberg US Aggregate Bond Index – Measures the total U.S. investment-grade bond market. The market-weighted index includes Treasuries, agencies, commercial mortgage-backed securities (CMBS), asset-backed securities (ABS) and investment-grade corporates.
MSCI ACWI (All Country World Index) ex USA Index – Measures large- and midcap representation across developed markets countries (excluding the US) and emerging markets countries. The index covers approximately 85% of the global equity opportunity set outside the US.
Russell 2000® Index — Measures the performance of the 2,000 smallest companies in the Russell 3000® Index.
S&P 500 Index – Measures changes in stock market conditions based on the average performance of 500 widely held common stocks. It is a market-weighted index calculated on a total return basis with dividend reinvested. The S&&P 500 represents approximately 80% of the investable U.S. equity market.
S&P 500®® Equal Weight Index — the equal-weight version of the S&P 500. It includes the same constituents as the capitalization-weighted S&P 500, but each company in the S&P 500 Equal Weight Index is allocated a fixed weight, or 0.2% of the index total at each quarterly rebalance.
“Bloomberg®” and the Bloomberg US Aggregate Bond Index are service marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited (“BISL”), the administrator of the indices (collectively, “Bloomberg”) and have been licensed for use for certain purposes by Raymond James Investment Management. Bloomberg is not affiliated with Raymond James Investment Management, and Bloomberg does not approve, endorse, review, or recommend Raymond James Investment Management’s Markets in Focus Weekly Insights. Bloomberg does not guarantee the timeliness, accurateness, or completeness of any data or information relating to Raymond James Investment Management’s Markets in Focus Weekly Insights.
London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). © LSE Group 2026. FTSE Russell is a trading name of certain of the LSE Group companies. Russell® is a trade mark of the relevant LSE Group companies and is used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.
M-927486 Exp. 8/27/2026
BY MATT ORTON, CFA, AND JOEY DEL GUERCIO, CFA1, 2
This rally has been extreme, but the underlying price action has been far from exuberant. With further volatility possible, this may be a time to be ready to use downside opportunistically rather than to chase the market.
Our base case is that equities grind higher as investment flows normalize and earnings take the lead.
Consider leaning into secular growth companies, beneficiaries of capital expenditures for artificial intelligence, and gold miners or commodities more broadly
What a difference a week can make. Markets continued their ascent notching new all-time highs and breaking records for the strength of this recovery rally.
Entering this week, the Nasdaq-100 Index was up 13 consecutive days, the longest winning stretch since 2009 and the fifth longest since 1970, while the S&P 500 Index recorded the second-quickest flip from oversold to overbought on record. This run is also the longest stretch in history outside of a recessionary period.
We’ve been constructive on markets, and we advocated buying the dip heading into this week. Still, the ferocity of this bounce has been a surprise. Given these strong gains across the equity complex and continued geopolitical volatility, how should investors be thinking about their asset allocations or putting some leftover cash to work?
While the rally has been extreme, it’s worth noting that the underlying price action was far from exuberant. Additionally, if the most extreme risks continue to subside, watch for the focus to shift increasingly from the macro to the micro. Earnings season is off to a strong start with good results from most of the large banks and capital market companies that have reported. And expectations for earnings growth remain positive not only for this quarter but for the rest of the year.
That said, a tenuous cease-fire still presents material headline risks. So rather than chase upside now, we favor being ready to use downside opportunistically. Consider leaning into secular growth companies, beneficiaries of artificial intelligence (AI) capital expenditures (capex), and gold miners or commodities more broadly.
The S&P 500 just saw its second-quickest flip ever from oversold to overbought
Source: Bloomberg, as of April 17, 2026
While the price action last week leaves the major indices overbought and susceptible to some healthy consolidation, we believe the path of least resistance remains higher absent further escalation in the Middle East.
One key driver of the recent advance has been positioning. The speed and power of the rally, combined with drawdowns in hedge fund performance, point to continued forced buying via investors covering short positions, commodity trading advisors (CTAs) taking on risk again, and a growing fear of missing out (FOMO). Short-covering still has some room to go, and it’s worth noting that volatility-control strategies were net sellers, as both the market and volatility rose simultaneously. We expect that this likely flips in coming weeks should realized volatility start to come down, providing additional buying support for global equities.
Perhaps most importantly, measures of sentiment and exposure still do not look stretched compared with late-2025 levels, so this does not yet look like an overly crowded rally. If earnings continue to provide support at the individual stock level and management commentary remains optimistic, there is room for further upside despite the fog of war.
First-quarter earnings reports kicked off in earnest last week and have reinforced the constructive fundamental backdrop. With about 10% of the S&P 500 reporting so far, the blended earnings growth rate stands at 13.1%, which would mark a sixth straight quarter of double-digit earnings per share (EPS) growth. The early read-through from the banks argues that the underlying economy is still on solid footing, with management teams describing a consumer that is still earning and spending, loan growth that is improving rather than deteriorating, and credit trends that remain manageable.
Money center bank commentary regarding exposure to private credit was more reassuring than alarming with no descriptions of a broad credit breakdown. There could be a growing divide between winners and losers in private credit, but the commentary from bank CEOs has helped to provide some much-needed stabilization to business development companies (BDCs) and the private credit industry overall.
Stepping back, the broader signal from earnings results so far is that this is not an earnings season defined by any macroeconomic breakdown. Instead, we believe it is a reminder that earnings remain the most important influence on the health of the stock market. So far, they are making a credible case both for market resilience and an underlying economy that remains sturdier than many have feared.
After the first week of earnings, the outlook remins rosy
FactSet consensus estimates for 1Q26 earnings season
Source: FactSet, as of April 17, 2026
This has been a concentrated rally, with less than 10% of S&P 500 stocks hitting new highs. For reference over the last 13 days, five stocks make up approximately 40% of the 14% rally in the Nasdaq-100 and 48% of the 11% rally in the S&P 500. Given the ferocity of the move, it’s likely that markets will consolidate or move sideways in the very short term, which could provide a healthy reset and perhaps create another opportunity to deploy capital.
Our base case is that equities grind higher as flows normalize and earnings take the lead. Investor behavior also suggests room for further upside given retail sentiment that is not yet stretched, coupled with the underperformance of many active managers in the recent rally as well as through the first quarter. No investment manager can catch a benchmark by holding cash and not owning stocks. Therefore, it’s unlikely there is enthusiasm to sell stocks on shallow pullbacks. However, our playbook remains to use downside opportunistically and not to chase the market higher. The geopolitical backdrop remains a key risk and — as the weekend showed — developments have been volatile. With that in mind, here are three areas of focus for our playbook:
AI capex beneficiaries. This remains the clearest mega-trend and driver of the market. And as the focus increasingly shifts to the fundamentals, the picture is still good. Results from two major semiconductor companies last week provided more evidence of strong demand trends spurred by the massive capex investments. Memory, semiconductor capital equipment, and optical stocks are also benefiting tremendously and gaining more pricing power with backlogs that push past the end of next year. It’s also worth pointing out some news from Anthropic last week — revenues hit a $30 billion run rate (up from $9 billion at the end of last year). That is quite remarkable and represents a big step forward in trying to answer whether the massive capex investment will pay off. The rally last week was concentrated and left some of the more cyclical AI capex plays in the dust — among them data center construction, cooling, and power generation. This could provide an opportunity for investors as performance in this area broadens again given the strong secular tailwinds behind earnings growth and profitability.
Magnificent once again. The mega-caps can keep running. Renewed strength across the Magnificent Seven has been a key contributor to market returns in the US, leading the narrowness in market gains through this recovery. We wrote a few weeks ago how this group was poised to rebound given the durability of their businesses and significant valuation compression. It seems like the market finally agrees, but we believe there is still room for further upside. Four of the Magnificent Seven — accounting for $11 trillion in market capitalization — report earnings on April 29. Watch for this to be a catalyst where signs of positive return on investments and positive guidance could lead to both earnings upgrades and further multiple expansion.
Looking to commodities for diversification. We talked about the breakout of the commodity complex even before the war in Iran, and it should be no surprise that we’re still optimistic. Commodities can play a bigger role in portfolios, both as a ballast and to participate in a world where resource security is becoming increasingly strategic. Gold shows signs of stabilizing at elevated levels after a nice recovery, and that could continue to support gold miners as a higher-beta way to get gold exposure, particularly as elevated realized prices are already translating into record or sharply improved cash flows and earnings at large producers. At the same time, the case for industrial commodities is becoming more structural than cyclical: In a fracturing world, governments are increasingly treating critical minerals as strategic assets — moving to secure supply chains and even to build strategic reserves — to ensure access to the raw materials needed for power, infrastructure, and growth. That shift is already showing up in the large-cap mining complex, where copper’s contribution to earnings has risen materially.
Geopolitics — The US-Iran ceasefire is set to expire on April 22 without a further extension.
US politics — The Senate Banking Committee holds a confirmation hearing for Kevin Warsh, nominated by President Donald Trump to lead the US Federal Reserve.
Data — Preliminary April S&P Global Flash Purchasing Manager Index™ data from several of the world’s largest economies will provide fresh insight on how the Iran war is impacting firms globally. Canada, the UK, Japan, and New Zealand also will publish updated inflation and consumer price data. In the US, watch for March retail sales to provide additional color on the state of the consumer.
Earnings — This week brings more reports from banks as well as some key industrials and energy companies, including companies in steel production, home building, life sciences and diagnostics, manufacturing, oil and energy, military contracting, healthcare, airlines, commercial jet manufacturing, telecommunications, electrification, semiconductors, electric vehicles, truck and equipment rental, precious metals mining, consumer goods, and commercial real estate.
1 Matt Orton, CFA, is Chief Market Strategist at Raymond James Investment Management. Joey Del Guercio, CFA, is Research Associate for Market Strategy at Raymond James Investment Management.
2 Unless otherwise indicated, all data cited is sourced from Bloomberg as of April 10, 2026.
Risk Information:
Investing involves risk, including risk of loss.
Diversification does not ensure a profit or guarantee against loss.
Disclosures:
Any forecasts, figures, opinions, or investment techniques and strategies set out are for informational purposes only. There is no assurance any estimate, forecast or projection will be realized.
Index or benchmark performance presented in this document does not reflect the deduction of advisory fees, transaction charges, or other expenses, which would reduce performance. Indexes are unmanaged. It is not possible to invest directly in an index. Any investor who attempts to mimic the performance of an index would incur fees and expenses that would reduce
return.
This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature, or other purpose in any jurisdiction, nor is it a commitment from Raymond James Investment Management or any of its affiliates to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical, and for illustration purposes only. This material does not contain sufficient information to support an investment decision, and you should not rely on it in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and make their own determinations together with their own professionals in those fields. Any forecasts, figures, opinions, or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions, and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements, and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.
The views and opinions expressed are not necessarily those of the broker/dealer or any affiliates. Nothing discussed or suggested should be construed as permission to supersede or circumvent any broker/dealer policies, procedures, rules, and guidelines.
Sector investments are companies engaged in business related to a specific sector. They are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification.
Investing in small cap stocks generally involves greater risks, and therefore, may not be appropriate for every investor. The prices of small company stocks may be subject to more volatility than those of large company stocks.
International investing presents specific risks, such as currency fluctuations, differences in financial accounting standards, and potential political and economic instability. These risks are further accentuated in emerging market countries where risks can also include possible economic dependency on revenues from particular commodities or on international aid or development assistance, currency transfer restrictions, and liquidity risks related to lower trading volumes.
Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments.
Links are provided for informational purposes only.
Definitions
Relative strength index / RSI — A momentum indicator that tracks the magnitude of recent price changes to analyze overbought or oversold conditions in the price of a particular asset. Typically, RSI values of 70 or higher indicate that an asset is becoming overbought or overvalued. RSI values of 30 or below suggest oversold or undervalued conditions.
S&P Global Purchasing Managers’ Index™ (PMI) — A survey of monthly indicators that track economic trends in more than 40 countries and regions, including the Eurozone.
Indices
S&P 500 Index — Measures changes in stock market conditions based on the average performance of 500 widely held common stocks. It is a market-weighted index calculated on a total return basis with dividend reinvested. The S&P 500 represents approximately 80% of the investable U.S. equity market.
Nasdaq-100 Index — Includes 100 of the largest domestic and international non-financial companies listed on the Nasdaq Stock Market based on market capitalization. The index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain securities of financial companies including investment companies.
M-922784 Exp. 8/20/2026
BY MATT ORTON, CFA, AND JOEY DEL GUERCIO, CFA1, 2
The S&P 500 Index has recovered nearly all of its drawdown since the start of the war, but do not count on a linear path forward.
The market appears to be in a place where we believe it makes sense to consider using downside opportunistically while expecting further volatility.
Areas to watch from the investment playbook: Mega-cap technology, beneficiaries of capital expenditures for artificial intelligence, gold, and gold miners.
As we expected, stocks took the escalator down as geopolitical risk rose in the Middle East, then rode the elevator up once investors started to see a more constructive path forward.
With the S&P 500 Index having recovered nearly all of its drawdown since the start of the war, the rebound of the past two weeks has rewarded our view that selective dip-buying was warranted — particularly across more attractive parts of technology with durable growth drivers tied to the super-cycle in artificial intelligence (AI) capital expenditures (capex).
That said, the breakdown in recent negotiations with Iran is an important reminder that this remains a tenuous backdrop and that the path forward is unlikely to be linear. More volatility should be expected but not feared, because it could create potential opportunities for investors willing to wade in slowly and stay selective. That discipline becomes even more important as earnings season kicks off this week and the market focuses on fundamentals, management commentary, and the insights guidance provides regarding the underlying state of the economy, consumer, and inflation.
Our view continues to be incrementally more constructive as the most extreme scenarios are taken off the table. We believe the recovery in secular growth winners and prior market leadership could set the table for improving breadth, while a bottoming of investor sentiment and positioning could support the approach of slowly and selectively buying dips going forward.
While the US-Iran negotiations failed to yield any tangible results, it seems like enough progress was made to avoid a resumption of hostilities. Even the “blockade” of the Strait of Hormuz announced by President Trump seems to be a bid for more negotiating leverage and time rather than the start of renewed conflict.
Unfortunately, there are still more questions than answers. This is why elevated volatility remains our base case. But we expect that any sharp reaction in the market likely creates new potential opportunities for investors who were not prepared for the initial leg higher in equities. And there are still plenty of areas to consider — the S&P 500 may have made a sharp comeback last week thanks to the strength of large-cap technology, but 54% of index constituents remain more than 20% off their all-time highs and nearly 50% are underperforming the index year to date. Many sector and industry valuations have come down as a result of the war, and positive earnings reports and management guidance could help multiples expand once again.
Valuations have reset meaningfully ahead of 1Q26 earning season
S&P 500 12-month forward price-to-earnings (P/E) ratios since 2015 with averages
Source: Bloomberg, as of April 10, 2026
First-quarter earnings season kicks off in earnest this week, with the money center banks setting the tone for whether fundamentals can keep pace with a still-complicated macroeconomic backdrop. While the aggregate earnings setup remains constructive, the early focus will be less on headline beats and more on the quality of results and the durability of guidance. For the banks, that means watching whether:
Fee and trading strength can continue to offset a less-powerful net interest income tailwind,
Loan and deposit growth are holding up,
Credit costs and consumer trends remain contained, and
Management teams sound more confident or more cautious about the economy, inflation, and broader demand trends.
Critically, we may move past the overhang of private credit on banks, which could allow for some multiple expansion, assuming a more benign backdrop, which has been our base case.
Markets took two steps forward last week on the news of a cease-fire, helping stocks extend their gain off the March 30 lows with the S&P 500 gaining more than 3% for a second consecutive week. While the rally has been largely driven by the largest technology companies, it’s important to see strength returning to prior market leadership. Unfortunately, Sunday’s setback with the breakdown in US-Iran negotiations and blockade of the Strait of Hormuz appears more like a bid for negotiating leverage than a departure from efforts to find an offramp.
With this backdrop, the market finally appears to be in a place where we believe it makes sense to consider using downside opportunistically while expecting further volatility along the way. Equity positioning looks to have hit a low just before the end of the first quarter — possible capitulation territory. If the market can better digest bad news and continue to rally toward new highs on good news, we would expect to see systematic buying flows increase as volatility starts to come down. The market has some negative news to work through to start the week, but the narrative is finally switching from macro to micro as first-quarter earnings season kicks off with earnings per share (EPS) growth expected to be in the mid-teens for the S&P 500. The driver of that growth is still mega-cap technology and AI. In light of these conditions, here are some areas we’re watching:
Mega-cap technology and AI capex beneficiaries. We have highlighted the tech complex for the past few weeks, and it’s encouraging to see some of the sector, particularly prior market leadership, bounce back. To be sure, technology is not a monolith: Last week it saw one of the largest historic divergences on record between software and semiconductor performance. This is a reminder that selectivity matters greatly in this tenuous market environment. We continue to focus on the AI capex beneficiaries where there appears to be the most visibility into the sustainability of earnings and revenue growth. Two major companies tied to semiconductor manufacturing report results this week, and one has already reported record quarterly results despite the war. But we believe the range of potential opportunities extends beyond just the semiconductor beneficiaries to the industrial side of the AI buildout as well as to the power grid supply chain. There is also an increased focus on the physical side of AI — robotics — and the supply chains that will be necessary to support future growth. Aerospace, electrical equipment, construction and engineering, utilities, and battery storage are all parts of the market that have held up well since their fundamental growth has not been meaningfully disrupted by the uncertainty in the Middle East.
Gold for ballast, gold miners for beta. After the recent volatility, we would treat another pullback in gold as an opportunity to consider adding exposure rather stepping away. That’s because the bigger drivers still appear to be intact: Gold remains a hedge against continuing currency debasement policies in the Group of Seven (G7) nations, and central bank demand remains firmly in place. For investors who need to add equity rather than metal, we view gold miners as an attractive higher-beta expression of the same view. That’s because bullion is still sitting well above industry cost curves. This helps explain why earnings and cash generation for the group could remain well-supported if gold doesn’t fall below its lows from a few weeks ago. That fits our framing of gold as a portfolio ballast from increased geopolitical turbulence and miners as a more pro-risk way to add exposure.
Tech is not a monolith
Ratio of S&P 500 semiconductor subsector to software subsector (normalized to 100 on 1/1/2021)
Source: Bloomberg, as of April 10, 2026
Data — March Producer Price Index (Tuesday) and US import prices (Wednesday).
Business sentiment — Empire State Manufacturing Survey (Wednesday) and Federal Reserve Bank of Philadelphia Manufacturing Business Outlook Survey (Thursday), US Federal Reserve Beige Book (Wednesday).
Fed speakers — Federal Reserve Bank of New York President John C. Williams (Thursday) and Governor Christopher Waller (Friday).
Europe — European Central Bank officials, including President Christine Lagarde on Tuesday, could clarify the bank’s reaction function in response to the Middle East war.
1 Matt Orton, CFA, is Chief Market Strategist at Raymond James Investment Management. Joey Del Guercio, CFA, is Research Associate for Market Strategy at Raymond James Investment Management.
2 Unless otherwise indicated, all data cited is sourced from Bloomberg as of April 10, 2026.
Risk Information:
Investing involves risk, including risk of loss.
Diversification does not ensure a profit or guarantee against loss.
Disclosures:
Any forecasts, figures, opinions, or investment techniques and strategies set out are for informational purposes only. There is no assurance any estimate, forecast or projection will be realized.
Index or benchmark performance presented in this document does not reflect the deduction of advisory fees, transaction charges, or other expenses, which would reduce performance. Indexes are unmanaged. It is not possible to invest directly in an index. Any investor who attempts to mimic the performance of an index would incur fees and expenses that would reduce
return.
This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature, or other purpose in any jurisdiction, nor is it a commitment from Raymond James Investment Management or any of its affiliates to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical, and for illustration purposes only. This material does not contain sufficient information to support an investment decision, and you should not rely on it in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and make their own determinations together with their own professionals in those fields. Any forecasts, figures, opinions, or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions, and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements, and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.
The views and opinions expressed are not necessarily those of the broker/dealer or any affiliates. Nothing discussed or suggested should be construed as permission to supersede or circumvent any broker/dealer policies, procedures, rules, and guidelines.
Sector investments are companies engaged in business related to a specific sector. They are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification.
Investing in small cap stocks generally involves greater risks, and therefore, may not be appropriate for every investor. The prices of small company stocks may be subject to more volatility than those of large company stocks.
International investing presents specific risks, such as currency fluctuations, differences in financial accounting standards, and potential political and economic instability. These risks are further accentuated in emerging market countries where risks can also include possible economic dependency on revenues from particular commodities or on international aid or development assistance, currency transfer restrictions, and liquidity risks related to lower trading volumes.
Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments.
Links are provided for informational purposes only.
Indices
S&P 500 Index — Measures changes in stock market conditions based on the average performance of 500 widely held common stocks. It is a market-weighted index calculated on a total return basis with dividend reinvested. The S&P 500 represents approximately 80% of the investable U.S. equity market.
S&P 500® Equal Weight Index — An index that includes the same constituents as the capitalization-weighted S&P 500 Index, but each company in the S&P 500 Equal Weight Index is allocated a fixed weight.
Producer Price Index / PPI — A report published monthly by the U.S. Bureau of Labor Statistics that measures the average change over time in the selling prices received by domestic producers for their output.
M-916996 Exp. 8/13/2026
BY MATT ORTON, CFA, AND JOEY DEL GUERCIO, CFA1, 2
The uncertainty is real, but the fundamental backdrop still points more toward caution and selectivity than recession.
Signs of US economic resilience include last week’s jobs report, consumer spending data, and continued strong capital expenditures on projects related to artificial intelligence.
Despite the war, S&P 500 Index year-over-year earnings are projected to grow by double digits for the sixth straight quarter.
It’s worth pausing to appreciate something genuinely inspiring: the Artemis II mission and the spectacular images from humanity’s first crewed lunar flyby in more than 50 years.
Beyond the symbolism, Artemis II reminds us that long-term investment, disciplined execution, and real progress still matter.
That perspective is useful, because back on Earth the lack of clarity following President Trump’s speech and weekend postings has only added to the uncertainty surrounding the war in the Middle East. In turn, that uncertainty has helped fuel a growing number of calls for a significant growth slowdown, including the risk of recession. While risks to growth have risen as the war continues, the increasing recession calls look misguided. That’s because they:
Underappreciate the scale of hyperscaler capital expenditures (capex) that remain in place;
Ignore that the economy entered this period from a position of strength, as Friday’s jobs report again showed; and
Fail to appreciate other offsets that could help to cushion consumer spending away from the pump.
The uncertainty is real, but the fundamental backdrop still points more toward caution and selectivity than recession. We remain cautious in our approach to the market and flexible in our approach to diversification. This means being tactical with respect to asset allocation, including looking across geographies, sectors, and industries instead of simply asset classes. With nearly half of the S&P 500 Index still in a bear market, there are plenty of potential opportunities for long-term investors.
The position from which the US economy entered the Strait of Hormuz shock will play an important role in where the economy goes. The strong headline March non-farm payrolls report on Friday supports a more optimistic view of the economy, even adjusting for some anomalies that led to the prior month’s weakness. While employment growth remains heavily tilted toward healthcare, education, and social assistance, we received further confirmation that the low-hire, low-fire environment remains in place and that aggregate income growth remains positive in real terms. Further, tax refunds are running $40 billion to $50 billion above trend in 2026, which may offset some of the dent to consumers from higher gas prices, at least for now.
Perhaps most important to economic resilience is the hyperscaler capex that is set to exceed $650 billion this year. This vast amount of spending contributes meaningfully to the growth of US gross domestic product (GDP) and provides an additional offset to a slowdown in consumer spending. Weekly credit card spending data excluding gasoline purchases has yet to show any worrying signs of deterioration in discretionary purchases, and we’ll hear from the banks next week for a detailed look at their consumers and outlooks. While this doesn’t ignore the consumer impact from the higher gas and input prices, we should not discount the positioning from which the economy is entering this heightened period of uncertainty.
Earnings also have remained resilient, which is a key anchor and reason for our optimism. Earnings growth estimates for the first quarter of 2026 have barely budged since the start of the conflict, sitting at 13.2% for the S&P 500. This is higher than the 12.8% growth expected at the start of the year. If these estimates hold up, this will mark the sixth straight quarter of double-digit, year-over-year earnings growth reported by the index. This is inconsistent with a recessionary narrative, or even a meaningful slowdown, and speaks to the resilience of corporate America.
However, most of the increase in earnings expectations for the first quarter over the past few months has been concentrated in the information technology and energy sectors. The information technology sector has the highest number of companies issuing positive earnings per share (EPS) guidance for the quarter. As a result of the pressure on software and semiconductor share prices recently, this has pushed valuations for the tech sector to its lowest level in years — even below where valuations sat at the depths of Liberation Day lows last April. Selectivity is critical, but this highlights potential buying opportunities that have been created amid recent market volatility. Guidance will be critical going forward, and it will be important for investors to pay attention to profit margins and how they are potentially being impacted by higher diesel prices or other dislocations from the bottlenecks around the Strait of Hormuz.
Earnings estimates have continued to rise despite Iran conflict
S&P 500 consensus EPS estimates since 2025
Source: Bloomberg, as of April 4, 2026
Near-term risks of further escalation in the Middle East have risen as credible offramps remain elusive. This, however, should be balanced with a view toward seeking long-term opportunities, especially in pockets of the market levered to durable secular growth themes. Oil prices will be key as further increases toward $120 per barrel will keep upward pressure on the dollar and interest rates, which in turn could lead to more pronounced bouts of equity volatility.
That said, it’s worth highlighting some relatively constructive price action across key market bellwethers like industrials, financials, and semiconductors, which remain in an uptrend. Despite the pain across financials, banks — unlike the broader market — haven’t broken below their November lows. We’ll hear from their management teams starting next week as earnings kick off. In the meantime, two important thoughts:
Remain patient and resist adding too much risk too early. While there have been some goods coming from the Strait of Hormuz (such as Iraq oil getting an exemption), it still largely remains closed and adds to further upside risks to energy prices. Additionally, pre-war energy supply buffers have now largely been exhausted, indicating that any floor for prices is rising and staying higher for longer is more likely. This is particularly acute for Asia where the last of pre-conflict seaborne oil and gas has been delivered. This is perhaps why volatility remains quite elevated across many Asian markets with the direction of oil and natural gas driving these markets. While it’s tempting to start dip-buying, especially for many companies that have been severely discounted due to geographic association rather than fundamentals, the likelihood that we get meaningful clarity in the next few days is small. Tread carefully, even when looking to add to quality parts of the market. Instead, make sure your shopping list is constantly updated and ensure that your portfolios are properly diversified.
Expect choppy price action ahead of fundamental catalysts. Equity positioning remains light and upside price action last Tuesday and Wednesday highlights how quickly the market can move as important forces like commodity trading advisors (CTAs) flip the switch to buy and shorts are forced to cover. Given the sharp whipsaws in the price of energy and a busy macroeconomic calendar with the first inflationary reads that incorporate the start of the Iran conflict, it’s likely that we continue to see choppy price action that keeps positioning on the sidelines and investors looking for hedging opportunities. We still must wait another week for fundamental catalysts, with first-quarter earnings kicking off April 14. For the mega-caps, the last two weeks of April will be crucial — most S&P 500 companies will report in that period, including six of the Magnificent Seven. Earnings season has the potential to help the market find its footing if bank management teams and technology companies reaffirm their outlooks and continued investment plans.
Economic data — US Consumer Price Index for March, Institute for Supply Management Services ISM® Report on Business®, and University of Michigan Index of Consumer Sentiment.
Risks increase as the conflict persists and higher energy prices start passing through to food and core prices over several via input costs working through supply chains. Additionally, the University of Michigan survey’s inflation expectations are becoming increasingly important to see how consumers are adjusting their views on the persistence of inflationary pressures as a result of the conflict. Keeping expectations anchored is a key goal for the US Federal Reserve.
Monetary policy — Outside of the US, we’ll hear from the Reserve Bank of India, Reserve Bank of New Zealand, and the Bank of Korea.
1 Matt Orton, CFA, is Chief Market Strategist at Raymond James Investment Management. Joey Del Guercio, CFA, is Research Associate for Market Strategy at Raymond James Investment Management.
2 Unless otherwise indicated, all data cited is sourced from Bloomberg as of April 2, 2026.
Risk Information:
Investing involves risk, including risk of loss.
Diversification does not ensure a profit or guarantee against loss.
Disclosures:
Any forecasts, figures, opinions, or investment techniques and strategies set out are for informational purposes only. There is no assurance any estimate, forecast or projection will be realized.
Index or benchmark performance presented in this document does not reflect the deduction of advisory fees, transaction charges, or other expenses, which would reduce performance. Indexes are unmanaged. It is not possible to invest directly in an index. Any investor who attempts to mimic the performance of an index would incur fees and expenses that would reduce
return.
This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature, or other purpose in any jurisdiction, nor is it a commitment from Raymond James Investment Management or any of its affiliates to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical, and for illustration purposes only. This material does not contain sufficient information to support an investment decision, and you should not rely on it in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and make their own determinations together with their own professionals in those fields. Any forecasts, figures, opinions, or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions, and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements, and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.
The views and opinions expressed are not necessarily those of the broker/dealer or any affiliates. Nothing discussed or suggested should be construed as permission to supersede or circumvent any broker/dealer policies, procedures, rules, and guidelines.
Sector investments are companies engaged in business related to a specific sector. They are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification.
Investing in small cap stocks generally involves greater risks, and therefore, may not be appropriate for every investor. The prices of small company stocks may be subject to more volatility than those of large company stocks.
International investing presents specific risks, such as currency fluctuations, differences in financial accounting standards, and potential political and economic instability. These risks are further accentuated in emerging market countries where risks can also include possible economic dependency on revenues from particular commodities or on international aid or development assistance, currency transfer restrictions, and liquidity risks related to lower trading volumes.
Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments.
Indices
S&P 500 Index — Measures changes in stock market conditions based on the average performance of 500 widely held common stocks. It is a market-weighted index calculated on a total return basis with dividend reinvested. The S&P 500 represents approximately 80% of the investable U.S. equity market.
M-912174 Exp. 8/6/2026
