Market Thoughts: Whatever it takes

I’m a believer in disciplined investing. Risk management, barbelled with 'experience-scars' and judgment. Continuous learning and improvement. A lack of hubris helps. If there’s a trick, it’s knowing what you don’t and can’t know. Expect the unexpected. I’d say the same about life.

How the stalemate in the Strait of Hormuz is resolved is a good example. I’ll qualify that by saying it will be resolved. Investors continue to look through the deadlock under the assumption we’ll see a lifting of the blockade. Game theory argues for it. How the actors behave may prove more challenging.

The U.S. could consider conditioning limited tanker access on a return to negotiations as a potential off-ramp; the alternative paths are escalation. Pivoting to target infrastructure would provoke Iran to do the same across the Gulf. Things could quickly spiral from there.

The last week in April is shaping up to be a big one for markets. The Federal Reserve, European Central Bank (ECB), Bank of England and the Bank of Japan hold monetary policy meetings. My sense, from recent central bank remarks, is that each are likely to stay on hold. Cuts, for now, off the table.

It’s also a big week for S&P 500 earnings. Hyperscalers will dominate the discussion. Looking at valuation levels, the market seems ahead of itself. Not only are earnings revisions pressing higher, so are margins. At the high-end of estimates, each with +15% objectives.

As of this writing, the current S&P 500 multiple is running above 25x. One- and two-year forward multiples are swirling around 21x and 18x, respectively. Investors can stomach an expensive multiple if earnings deliver. That’s the equity market we had last year. The ‘easy’ money’s been made.

For the record, it’s rarely (if ever) easy. Should earnings print strong, it’s hard earned. It signals a healthy market, expected earnings delivered on high hopes. This should prove the sixth straight quarter of double-digit earnings growth for the S&P 500. That’s why markets are trading where they are.

Systematic trading strategies, including commodity trading advisors (CTAs), added a bump to market support. The same for hedge funds unwinding risk hedges. Both seem to be stalling out. Retail investors never jumped in aggressively, from what I’ve seen in flows. They also didn't cut and run.

Pension funds and institutional investors seem to have held the line on the amount of risk they had coming into the war. Risk assets were expensive at the start of the year. They're creeping up there again. That should argue for a pause in exuberance. Also, not chasing after risk unless you're a particularly talented trader.

A healthy bout of consolidation is warranted. We’ll see where headlines take us. That’s a remark about the Gulf. Also, reported earnings and operating leverage, C-suite comments about the outlook and expectations for buybacks.

The corporate repurchase window reopens after earnings. A thought worth sharing? Day-to-day investors set prices, but the largest net buyer of U.S. equities remains corporations. They’ve been leaning into repurchases. That’s a boost to investor sentiment and offers support to markets.

Investors are positive on the outlook. Market momentum is wobbly, but bullish. That said, consumer confidence is slipping. The Eurozone (EZ) is a clear case in point. April advanced confidence figures in the EZ were at their lowest since 2022, when Russia invaded Ukraine.

Consumers globally are feeling pressure from energy prices. That’s particularly the case across Asia and Europe. Coming soon to a country near you? Confidence levels in the EZ are in line with where they were during the European debt crisis, which peaked between 2010 and 2012.

Mario Draghi—then ECB President—made his “Whatever it takes” remark in July of 2012, to support the euro as it seemed ready to break. Those comments marked an inflection point in the sovereign crisis.

Lifting the blockade of the Strait might make for a similar moment. A collective sigh of relief. That’s an observation, not foretelling. Occasionally the path of least resistance proves true. But I’ll point out, hope for de-escalation is already well in the market price. Whatever it takes…

Unless explicitly stated otherwise, all data is sourced from Bloomberg, Finance LP, as of 4/23/26

Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable but should not be assumed to be accurate or complete. The views and strategies described may not be suitable for all investors.