Sell in May and Go Away?
“Sell in May and go away” is one of Wall Street’s oldest seasonal adages, but April’s market performance made a compelling case for ignoring it entirely. U.S. equities delivered one of their strongest monthly showings in recent memory, with the S&P 500 surging 10.5% and the NASDAQ leaping 15.3%, capping off a sharp V-shaped recovery from March’s turbulence. The rebound was broad-based, stretching across market caps and geographies, as international markets added to strong local gains on the back of U.S. dollar weakness.
Underneath the surface, the fundamentals are holding up better than many feared: Q1 GDP grew 2% year-over-year, corporate earnings came in at a staggering 27.7% growth — nearly double analyst expectations — and employers added a better-than-expected 115,000 jobs in April. Globally, the picture was more nuanced: China’s economy picked up steam in Q1 with 5% GDP growth as robust exports offset sluggish domestic consumption, while Taiwan posted its fastest expansion since 1987 — up 13.7% — fueled by surging demand for AI-related exports.
In contrast, the Eurozone slipped back into contraction territory, with the composite PMI falling to a 17-month low of 48.6 and inflation hitting 3% in April, its highest reading since September 2023, as the Iran conflict weighed heavily on the services sector. Japan, meanwhile, saw bond yields climb sharply as the 10-year JGB hit 2.5%, driven by rising inflation expectations and growing market pressure on the Bank of Japan to reconsider its policy stance.
To be sure, risks remain. The Iran conflict is clouding the energy and inflation picture globally, and U.S. valuations are elevated. But for investors who stayed the course through March’s volatility, April was a powerful reminder that trying to time the market’s seasonal patterns can mean missing its best days.
Economic Growth and Employment Post Strong Rebounds in April! Prices March Higher
- First quarter GDP in the U.S. grew 2.0% year-over-year (Y/Y), well ahead of the 0.5% rate reported in Q4 of 2025 but below Wall Street expectations. The main contributors to the rise in GDP in Q1 were investment, exports, consumer spending, and government spending. Imports increased in Q1. Business investment, driven by the AI boom, rose 8.7% on an annual basis. However, consumer spending growth, which drives nearly two-thirds of economic activity in the U.S., slowed from 1.9% at the end of 2025 to 1.6%. While the economy has remained resilient, the Iran war is clouding the outlook. Thus far, most economists pin the impact from the Iran war and higher oil/energy prices at a 0.3–0.5% drag on 2026 GDP growth.
- U.S. employers added 115,000 new jobs to the economy in April, ahead of the 55,000 forecast. The unemployment rate held at 4.3%, further proof that the labor market has reached a point where only modest job creation is needed to keep the jobless level steady. Average hourly earnings came in lower than expected, increasing 0.2% month-over-month (M/M) and 3.6% Y/Y. The broader U6 unemployment rate did tick higher to 8.2% and the labor participation rate fell again to its lowest level since October 2021.
- Americans have been hit hard by the surge in energy prices. The latest PCE Index report showed that headline prices rose 0.7% M/M or 3.5% Y/Y in March. Core PCE jumped 0.3% M/M or 3.2% Y/Y. The bulk of the price pressure came from goods, which rose 1.4% as energy goods and services prices jumped 11.6%. Services prices overall rose 0.3%. The April CPI report showed headline inflation increased at an annual rate of 3.8% with core CPI rising just 2.8%. This was the highest CPI reading since May 2023.
Source: Bureau of Economic Analysis
Consumers & Businesses Keep Spending!
U.S. retail sales rose 1.7% in March after an upwardly revised 0.7% increase in the prior month. This marks the steepest growth since March 2025, driven by a record 15.5% surge in gasoline station receipts as fuel prices spiked. Despite rising pump prices, consumer spending remained solid across nearly all categories, boosted by larger-than-usual tax refunds. Core retail sales, excluding volatile sectors, climbed 0.7%. New orders for durable goods rose 0.8% in March. The large headline gain occurred despite a 21.1% drop in commercial aircraft orders. Orders excluding transportation increased 0.9% in March and 7.6% Y/Y. Core shipments — a key input for business investment in the calculation of GDP — rose 1.2% in March and were up an 8.3% annualized rate in Q1 versus the Q4 average. Business investment has consistently risen since mid-2025, driven by a more favorable tax environment and AI spending.
Corporate Earnings Are Quite Honestly Remarkable!
Through 90% of the Q1 earnings season for the S&P 500, earnings have come in well ahead of expectations. Analysts expected 13.1% Y/Y growth in Q1, but companies have reported a staggering 27.7% Y/Y growth. This would mark the highest level of growth since Q4 2021. The headline numbers are impressive, but most of the upside has come from hyper-scalers and companies leveraged to the AI trade. For the full year, consensus estimates show earnings growth of 21% in 2026 and 15.3% in 2027. Energy, technology, materials, and communication services are expected to see the strongest rates of growth in 2026. Valuations are elevated within U.S. equities so strong earnings should help provide an added boost to prices. 2026 was supposed to be the year of the S&P 493 catching the Mag 7 on earnings growth, but that has not been the case thus far.
Source: FactSet
Eurozone Growth & Business Activity Weakens, Inflation Jumps in Europe & Japan
- After 16 consecutive months in expansion territory, the eurozone composite PMI dipped back below 50 into contraction. The headline reading of 48.6 was down from 50.7 in March, representing a 17-month low. The service sector fell to a 62-month low in activity while the manufacturing sector hit a 47-month high. April’s flash PMI has moved into contraction territory for the first time since late 2024, signaling a 0.1% quarterly rate of GDP decline after a 0.2% gain had been signaled for Q1. The war is hitting the service sector hardest, where business activity is falling at a rate not seen since the pandemic lockdowns of early 2021.
- Eurozone GDP grew by just 0.1% quarter-over-quarter (Q/Q) in Q1 2026, down from 0.2% growth in Q4 2025. On an annual basis, the eurozone economy expanded by 0.8%, with manufacturing and energy shocks contributing to the sluggish performance. Eurozone inflation hit 3% in April, the highest reading since September 2023. Services inflation increased 3% amid a 10.9% surge in energy prices.
- Japanese bond yields have been jumping higher on the back of higher inflation readings and expectations. The 10-year JGB hit 2.5% last week, driven by the war in Iran and core inflation which hit an annualized clip of 2.4%. While the Bank of Japan indicated in March that it was holding current policy rates at 0.75%, a growing consensus has formed that the central bank must swiftly raise the policy interest rate if underlying inflation continues to stay above 2%.
China’s GDP Picks Up in Q1, Chip Sales Fuel ~14% Growth Surge in Taiwan!
- China’s economy gathered steam in the first quarter, as robust exports offset sluggish domestic consumption. GDP grew 5% Y/Y in Q1, up from the 4.5% rate reported in the final quarter of 2025. For the full year, China has lowered its growth target to a range of 4.5–5%. The real estate downturn persisted in Q1, with investment falling 11.2%, an acceleration from a 9.9% drop during the same period last year. In addition, retail sales rose 1.7% Y/Y in March and industrial output increased by 5.7%. In the first quarter, China’s exports grew 14.7% from a year earlier in terms of U.S. dollars, the fastest pace since early 2022.
- Taiwan’s economy expanded 13.7% in Q1 of 2026, its fastest pace of growth since 1987, as demand for AI-related exports continued to soar. Several economists have raised their 2026 growth estimates to the 8% range, up from 6.5–7%. Exports surged on robust demand for AI, cloud infrastructure, and new high-end product ramps, with real exports of goods and services up 35.3% Y/Y.
How Long Can Oil Stocks Last?
The Iran War has choked off trade traveling through the Strait of Hormuz. Significant percentages of oil/energy and fertilizer flow through this part of the world to consumers and farmers across the globe. Oil prices have surged higher since the start of the war and fertilizer prices have also jumped, putting at risk farming and food supplies. Strategic reserves are abundant today, but the longer this crisis plays out, the impact on the global economy could be substantial.
