Your Capital Markets Snapshot: Markets Posted Strong Gains Last Week

Courtesy of Allen Davis, CFP®

Markets posted strong gains last week as easing Middle East tensions, falling oil prices, and supportive early earnings results helped restore investor confidence. Two of the three major U.S. equity indices broke new record highs, with the Dow Jones trading near its prior peak, as markets increasingly priced out the potential for the most severe downside scenarios tied to the Iranian conflict and global energy supply disruptions. A key underpinning of the rally was continued earnings resilience, with S&P 500 first-quarter profits expected to grow nearly 12% year-over-year and early bank earnings came in better than expected. Fixed income markets also supported the constructive tone, as Treasury yields declined for a fourth straight week following a softer-than-expected March Producer Price Index reading and a drop in oil prices. Leadership remained in growth-oriented areas of the market, particularly technology, while investors appeared to begin unwinding defensive positioning that built up following the start of the Iranian conflict and ensuing period of elevated volatility. Despite the recent optimism, the Iranian conflict has not ended, and global energy supplies are still disrupted, which means volatility can reemerge in the near term.