Three Factors Supporting This Market (for 4/8/26)
Stocks are down YTD, and markets have been volatile, but when considering the headlines facing them
(oil price spike, AI anxiety handicapping the most important sector in the market, and private
credit hampering financials), the fact that the S&P 500 is only down marginally YTD is a testament
to this market’s historic resilience.
Generally speaking, there are three factors that help support this market and keep losses
manageable. First, markets still think the U.S./Iran war will be limited in duration (at least in
terms of its impact on oil prices). Hope for a near-term ceasefire faded last week following
President Trump’s prime-time address, but despite the rhetoric, markets will have the view that the
conflict, at least as it impacts oil prices, will be limited.
There’s proof of that happening, as Iran, over the past few days, has made agreements with Oman and
Iraq to safely ship oil through the Strait of Hormuz. Remember, the market only “cares” about the
conflict because of its impact on oil prices. If oil shipments through the Strait return close to
normal (they’re about 20% normal now, but at the highest level since the war), then the conflict
will not remain a key market headwind. However, if the market begins to think the disruption to oil
prices will last months and quarters, then the outlook for markets becomes much more negative.
Second, solid economic growth. The U.S. economy has proven historically resilient over the past few
years (COVID, surge in inflation/rates), and it’s doing so again, and that’s helping stocks. As
long as growth can stay solidly positive, the “tide” for all markets will stay stable or continue
to slowly rise, and that’s powerful support for markets driven by geopolitical concerns.
Third, above-average earnings growth. Earnings season starts this week (and ramps up over the next
three weeks), and earnings growth remains a critically important part of this resilient market.
Earnings estimates for the S&P 500 remain above $300/share (some have it as high as $310 or $315),
and that’s critical, yet often overlooked support for markets.
That means this coming earnings season (which again starts this week but really ramps up starting
next week) is important because if companies reiterate guidance, that will push back on
macroeconomic concerns.
Bottom line, the market’s resilience is a reminder that market headwinds (higher oil, private
credit, and AI anxiety) are only demonstrably negative if they reduce economic or earnings growth
expectations. If they do not, and economic and earnings growth stay solid, then the market will
stay more resilient than the headline would imply, and that will be the difference between a
pullback and a full-blown correction/bear market.
Just a reminder, midterm election years are always volatile to down, so all the above negatives can
go away, and we still face a headwind because of the elections. We remain
conservative until that is behind us.
Source: Sevens Report 4-8-26