By Rick Schwerd |
Our investment team remains committed to sharing updates and market insights to keep you informed. Please look for
our next update on May 15.
Markets Surge in April
Stocks continued their April surge as corporate earnings growth accelerated amid an AI-driven rise in business
investment. Over the last month, equities have looked beyond the geopolitical environment and high oil prices,
focusing instead on strong first-quarter earnings and future earnings predictions.
The S&P 500 is up nearly 10 percent in April and is now 5.3
percent higher this year. The tech-heavy NASDAQ has performed even better, rallying 14 percent in April and rising
7.1 percent year-to-date. Both indexes are sitting at record highs.
Oil Resumes Its Trek Higher
Oil prices dropped mid-April following a ceasefire announcement in the war with Iran but have moved higher over the
last couple of weeks. West Texas Intermediate (WTI) oil now sits at
$104 per barrel, representing an 82 percent increase this year. Equity markets have risen despite the surge.
However, high petroleum prices act as a tax on the economy, weighing on growth.
As we have discussed previously, AI and energy investment, tax cuts and increased productivity are all acting as
tailwinds. However high oil prices remain a strong headwind for the economy. The longer the shutdown of the Strait
of Hormuz lasts, the greater the likelihood of long-term damage to the global economy.
Strong Earnings Season So Far
Tech mega-caps Meta, Microsoft, Amazon and Google reported strong earnings growth Wednesday. According to the
research firm Earnings Scout, the S&P 500 year-over-year earnings
per share for the quarter have increased 19.6 percent for companies that have reported thus far. The average
earnings surprise is upward of 8.11 percent.
The energy sector has seen earnings per share growth of an amazing 90 percent, while information technology stocks
are up 41 percent. More importantly for stocks, expectations for the remaining three quarters of the year continue
to rise.
CapEx Spending Continues to Surge
Driven almost entirely by the AI infrastructure buildout, capital expenditures continue to increase exponentially. Amazon, Google, Meta and Microsoft — the "AI hyper-scalers" — are expected to spend $715 billion on capex this year,
according to Bloomberg. This represents a 90 percent increase over the $376 billion that the four companies spent
just last year. For perspective, these companies spent $147 billion in 2023 and $69 billion in 2019. This rapid
increase in spending is a key driver of the current bull market, now in its fourth year.
Looking Forward
The busiest part of the first-quarter earnings season continues, with another 160 S&P 500 companies reporting next week, including AMD and
McDonald's. The April labor market report will be released at the end of next week.
Have a great weekend and as always, if you have any questions or concerns regarding markets or your
financial planning needs, please reach out to us at (518) 415‑4401.
About the Author: With almost three decades of financial industry experience, Rick serves as a
Senior Investment Officer at Arrow Bank. He oversees individual and corporate retirement plans, personal trusts,
investment management accounts, foundations and not‑for‑profit relationships.