Morning Note

Lots of ink being spilled (that's old school talk) of late in celebration over the S&P 500 hitting a new all time high... Well, alas, if we peek a bit below the headlines, we discover a somewhat less-celebratory reality.

One of the first places -- alongside determining if the recent ascent has been earnings-driven or multiple-(meaning the price in the price/earnings multiple)-driven, and interpreting the signal -- I go is to the underlying breadth readings... Which, at current, are nothing to celebrate.

Today is a prime example... As I type the S&P 500 is up 0.42% while 326 (60+%) of its members are actually in the red on the session... The Nasdaq is up over 1% while 54% of its members are trading lower.

Bigger picture, while, again, the S&P 500 sports a new record, literally 462 (92.4%) are actually trading somewhere below (notably below in many cases) their 52-week highs.

My point being, this is not the kind of action that has us feeling confident that the worst for now is over.

Now, all that said, I do maintain that, in the near-term, an end to the Iran conflict would very likely bring animal spirits -- and market breadth along with them -- roaring back to the market.

Speaking of animal spirits, this morning's release of the widely followed University of Michigan US Consumer Sentiment Survey showed its lowest print on record!  

Here's your PWAI morning rundown on the latest Middle East developments, etc.

PWA Morning Note | Friday, April 24, 2026

Markets are bouncing this morning after Thursday's pullback, with the S&P 500 up roughly half a percent and the Nasdaq leading at +1.5%, driven by a strong Intel earnings report that is lifting the semiconductor complex broadly. The Dow is slightly negative, reflecting the divergence we've seen throughout this cycle — narrow tech leadership carrying the index while cyclicals and defensives lag.

The dominant story remains Iran and the Strait of Hormuz. Iranian Foreign Minister Araghchi is arriving in Islamabad tonight to meet with Pakistani mediators, with a US logistics team already on the ground. A second round of formal talks appears to be taking shape. That's the reason oil is pulling back modestly this morning and equities are catching a bid. We view this as constructive but not conclusive — the diplomatic channel is reopening, which reduces the immediate tail risk, but the structural impasse hasn't changed. Iran's parliament is moving toward formally codifying toll and access rules on the strait, which is consistent with our long-held view that Tehran is institutionalizing its leverage over Hormuz rather than relinquishing it. Ceasefire and Hormuz reopening remain decoupled events. Energy prices stay elevated until that changes.

On the macro front, the week's data has been incrementally mixed. Jobless claims remain low at 214K, confirming the labor market hasn't cracked, but the Atlanta Fed's GDPNow model has the first quarter tracking at just 1.2% annualized — a significant step down from where consensus stood at the start of the year. The BEA's official Q1 advance estimate drops next Thursday, April 30, the same afternoon the Fed announces its rate decision and the same evening Microsoft, Alphabet, Meta, and Amazon all report earnings. That's a lot of event risk compressed into a single afternoon, and we think the market is underpricing the volatility potential given where the VIX sits today.

On the Fed, Kevin Warsh's confirmation hearing concluded this week. His framework — abandoning core PCE as the inflation benchmark, eliminating forward guidance, reducing reliance on quantitative easing — survived the hearing largely intact. His confirmation path has one complication: a Republican senator has indicated he'll block the vote until a separate DOJ matter is resolved. Regardless of timing, the direction of Fed policy under Warsh points toward a structurally tighter framework arriving precisely when an energy supply shock is already pressuring inflation. We think the market is too optimistic about the pace of rate cuts in the second half of 2026.

Earnings season has been broadly constructive. Of the S&P 500 companies that have reported, 81% have beaten earnings estimates, with blended year-over-year EPS growth running at 13.2%. Financials have been the standout — banks, capital markets, and insurance all delivering double-digit growth. Energy is the laggard, with estimates for Exxon and Chevron being revised down as higher oil prices squeeze refining margins and volumes. The real test is next week when the Magnificent Seven reports in force.

Portfolio positioning remains consistent with our base case: the ceasefire holds, diplomatic engagement continues, and the gradual path toward Hormuz normalization supports risk assets over a multi-week horizon — even if the near-term is choppy. We are long energy, international equities, and selectively long technology, with tail hedges in place. The setup into next week warrants caution on adding new exposure ahead of what is shaping up to be the most data- and event-dense week of the quarter.