The Boys are Back in Town
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The Boys are Back in Town

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As the month neared the end, the research team was questioning what does it take to “break” the U.S. equity markets.  Starting with a global pandemic in 2020, the ensuing springs have included a short-lived Asian and European banking scare due to an overleveraged hedge fund (2021), the twin-billing of the Russian invasion of Ukraine and spiking inflation (2022), another banking scare in the U.S. (2023), more inflation and a Middle East flare-up (2024), and Liberation Day’s re-ordering of U.S. trade policy (2025).  Not to be outdone, this spring has the Iran Conflict that dramatically impacted the global energy supply and roiled investment markets around the globe. With the exception of 2022, the sharp decline in equity markets was followed by larger rallies that lifted U.S. equity markets to high double digit or better returns by each year end. 2022 was the lone negative year as the inflation shock persisted into 2023. Overseas markets have fared favorably as well, including 2025 when MSCI EAFE beat the S&P 500 by 13.6%. Why has the U.S. equity market been able to rally after each of these setbacks?

Among the many reasons put forth, two are easy to identify and explain. First, the U.S. economy is broadly diversified with strengths in every sector. This means that when one or more sectors is facing challenges investors can rotate to other sectors that are more insulated from the stress or may be benefiting from the conditions that are hurting the struggling sectors. The U.S. economy is also powered by strong and diverse consumption engines. Through all of the turmoil since Covid, the U.S. consumer has proven its ability to spend and consume goods and services at increasing rates. At the same time, business investment and government spending continues to grow. These combined engines for growth have driven U.S. stocks to power through any temporary setbacks. The second reason for U.S. equity market resilience is the global dominance in innovation, particularly in tech related industries. As seen by the rally in most of the Mag 7 stocks in April, investors have returned to what has worked coming out of the spring setbacks. All but Tesla generated positive performance in April and, in most cases, the big boys more than recovered their negative results in March. The level of innovation across the U.S. economy is unparalleled and investors are willing to ride with these names until something stronger comes along to break the U.S. equity market.

U.S. equity markets were up 8-12%, with small cap stocks up over 12% while the S&P 500 posted a 10.5% monthly return. The Communication Services and Technology sectors powered the rally as investors saw opportunities to buy on dips across many of the big cap stocks that were hit in March. Non-U.S. stocks also rallied, with MSCI EAFE up 7.5% and MSCI Emerging Markets leading all major indices with a 14.7% return. The stabilization and small decline in energy prices caused by a modest de-escalation in the Iran Conflict were enough to spark a rally in many countries, particularly in emerging markets. U.S. Bond markets were slightly positive as interest rates fell slightly during the month. The Bloomberg Agg was up 0.1% and high-yield bonds rose 1.7%.

Here are observations on what occurred across the investment markets in April:

Broad Market Performance¹

• U.S. equity markets rebounded sharply in April across all market caps and styles. The S&P 500 gained +10.5% and the NASDAQ 100 surged nearly +16%, driven by strong Q1 earnings results.
• Growth stocks reversed their Q1 underperformance, outperforming value across large and mid caps as Technology and Communication Services led the rally. Small caps were the standout with the Russell 2000 up +12.2% for the month.

International and Global Equities³

• International developed markets participated in the April rally, though to a lesser degree than U.S. equities. The MSCI EAFE gained +7.5% while currency tailwinds from a weakening U.S. dollar provided further support to non-U.S. dollar returns.
• Emerging market stocks surged +14.7% in April, led by Asia ex-China. China lagged at +3.6%. Renewed risk appetite from the tariff pause drove returns despite elevated energy import costs from the ongoing Iran conflict.

Fixed Income Markets⁴

• U.S. bond market returns were modestly positive in April as interest rates moved marginally lower. The Bloomberg U.S. Agg returned +0.11%, with credit spreads stable. High yield outperformed at +1.7% as risk sentiment improved alongside equities.

Specialty Markets⁵

• Oil prices remained historically elevated throughout April, with Brent trading between roughly $100 and $126. REITs rallied +9.0%, supported by the improved equity risk environment.

Sectors⁶

• Information Technology (+17.5%) and Communication Services (+18.5%) led all sectors in April, reversing Q1’s underperformance. Energy was the lone negative sector at -3.5%, a notable reversal given Brent crude surging from $80 to $114–$126 over the period.

After observing how frequently the U.S. equity markets have bounced back from the many spring setbacks it is understandable that investors would think that this should be expected. While Covid was an “unprecedented” event (remember how many times you heard that phrase), the other spring setbacks are more familiar to investors – regional conflicts, changes in economic policy by a new administration, etc. This familiarity and an expected response to the setbacks have allowed many investors to look past the temporary decline and ride through the trouble to better results later by year end. In the midst of the March lows, there were more questions about what will bring the markets back than will they come back based on past patterns of decline and rally. This time it appears the “boys are back in town”.

^1-6 All data referenced in the table and comments supplied by Morningstar as of 04-30-2026

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