Stocks Rebound to New Highs as Geopolitical Tensions Stabilize
The S&P 500 Index gained more than 10% in April, recovering its March decline and setting a new high. Nine of eleven sectors traded higher as stocks recovered from the March selloff, but eight sectors underperformed the index as mega-cap stocks represented a majority of the gains.
Bonds traded lower in April as Treasury yields increased. However, corporate bonds outperformed Treasury bonds as credit spreads tightened.
International stocks underperformed the S&P 500 as U.S. Growth stocks led during the recovery. Emerging markets gained 14.7% and outperformed developed markets’ 7.6% return, with energy-importing regions like Europe and Japan impacted by the continued oil supply disruption.
Geopolitical Risks Stabilize
Back-to-back ceasefires, first between the U.S. and Iran on April 7th and then between Israel and Lebanon on April 16th, changed investors’ outlook, and the reversal was immediate across markets.
The S&P 500 erased all its March losses and went on to set a new all-time high by month-end. The Dow surged over 1,300 points the day the U.S.-Iran ceasefire took effect, its best day in a year. The Nasdaq Index gained nearly 15% during the month, driven by a historic semiconductor rally, and the Russell 2000 small-cap index gained just under 10% to reach an all-time high.
The recovery also reached beyond stocks. Credit spreads, which reflect how concerned the bond market is about corporate borrowers, reversed three months of widening in four weeks, and market uncertainty, as measured by the VIX Index, fell to pre-conflict levels.
The relief was broad and fast, but the underlying situation remains unsettled. The Strait of Hormuz, which carries roughly 20% of global oil supply, remains effectively closed, with only a few tankers crossing daily compared to hundreds before the conflict. Oil prices fell sharply on the ceasefire announcements, including the largest single-day decline since 2020, but have since risen back above $100 per barrel. Gasoline remained above $4 a gallon throughout April, and consumer confidence fell to its lowest reading in the University of Michigan survey’s 70-year history.
The ceasefires reduced fears of further near-term escalation, and investors moved quickly to price that in. However, the oil supply disruption resulting from the conflict has not been resolved. We remain concerned over the longer-term impact of the oil infrastructure destruction.
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Market Commentary 5/05/2026
Stocks Rebound to New Highs as Geopolitical Tensions Stabilize
The S&P 500 Index gained more than 10% in April, recovering its March decline and setting a new high. Nine of eleven sectors traded higher as stocks recovered from the March selloff, but eight sectors underperformed the index as mega-cap stocks represented a majority of the gains.
Bonds traded lower in April as Treasury yields increased. However, corporate bonds outperformed Treasury bonds as credit spreads tightened.
International stocks underperformed the S&P 500 as U.S. Growth stocks led during the recovery. Emerging markets gained 14.7% and outperformed developed markets’ 7.6% return, with energy-importing regions like Europe and Japan impacted by the continued oil supply disruption.
Geopolitical Risks Stabilize
Back-to-back ceasefires, first between the U.S. and Iran on April 7th and then between Israel and Lebanon on April 16th, changed investors’ outlook, and the reversal was immediate across markets.
The S&P 500 erased all its March losses and went on to set a new all-time high by month-end. The Dow surged over 1,300 points the day the U.S.-Iran ceasefire took effect, its best day in a year. The Nasdaq Index gained nearly 15% during the month, driven by a historic semiconductor rally, and the Russell 2000 small-cap index gained just under 10% to reach an all-time high.
The recovery also reached beyond stocks. Credit spreads, which reflect how concerned the bond market is about corporate borrowers, reversed three months of widening in four weeks, and market uncertainty, as measured by the VIX Index, fell to pre-conflict levels.
The relief was broad and fast, but the underlying situation remains unsettled. The Strait of Hormuz, which carries roughly 20% of global oil supply, remains effectively closed, with only a few tankers crossing daily compared to hundreds before the conflict. Oil prices fell sharply on the ceasefire announcements, including the largest single-day decline since 2020, but have since risen back above $100 per barrel. Gasoline remained above $4 a gallon throughout April, and consumer confidence fell to its lowest reading in the University of Michigan survey’s 70-year history.
The ceasefires reduced fears of further near-term escalation, and investors moved quickly to price that in. However, the oil supply disruption resulting from the conflict has not been resolved. We remain concerned over the longer-term impact of the oil infrastructure destruction.
Want to read more? Click below to download our entire market commentary…
S&P 500 Index is a capitalization-weighted index calculated on a total return basis with dividends reinvested. The index includes 500 widely held U.S. market industrial, utility, transportation and financial companies.
Wells Fargo Advisors Financial Network did not assist in the preparation of this report, and its accuracy and completeness are not guaranteed. The report herein is not a complete analysis of every material fact in respect to any company, industry or security. The opinions expressed here reflect the judgment of the author as of the date of the report and are subject to change without notice. Any market prices are only indications of market values and are subject to change. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. Additional information is available upon request.
Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index. PM-11042027-5459703
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