New Highs, $100 Oil, and the AI Bet That’s Splitting Tech in Two

by Jonathan Dane of Defiant Capital Group, 5/5/26

Monthly Market Update

  • S&P 500 gained 10.5% in April, setting a new all-time high. Communication Services led all sectors, gaining 18.5%, followed by Technology (up 17.5%) and Consumer Discretionary (up 11.7%). Nine of eleven sectors gained, but eight underperformed the index as mega-cap stocks drove the bulk of returns.
  • Bonds pulled back as Treasury yields rose. The U.S. Bond Aggregate returned just 0.1%, with high-yield bonds gaining 1.6% and investment-grade returning 0.4% as credit spreads tightened across the board.
  • Emerging Markets outperformed the S&P 500, gaining 14.7% in what is shaping up to be the best stretch of absolute and relative EM performance in years. Developed Markets rose 7.6% and lagged, with Europe and Japan weighed down by sustained oil supply disruption through the Strait of Hormuz.
  • Small caps rallied: the Russell 2000 gained 9.8% and set a record of its own. The Nasdaq gained nearly 16% for the month, led by a historic semiconductor surge.
  • Consumer confidence fell to a 70-year low in the University of Michigan’s survey (the weakest reading in the survey’s history) even as equities hit new highs.

The Ceasefires Cleared the Worst-Case Scenario, but the Strait is Still Closed

The stock market’s April 206 reversal had a clear catalyst. Back-to-back ceasefires (the U.S.-Iran agreement on April 7 and the Israel-Lebanon ceasefire on April 16) removed the tail risk that had been building since late winter. The S&P 500 erased all of March’s losses and pushed to a new all-time high by month-end. The Dow surged more than 1,300 points on the day the U.S.-Iran deal was announced, its best single session in a year. The Nasdaq gained nearly 16% for the month. Credit spreads, which had been widening steadily through the conflict, reversed three months of deterioration in four weeks, and the VIX fell back to pre-conflict levels.

The complication is that the ceasefires stopped the escalation without resolving the underlying disruption. The Strait of Hormuz, which carries roughly 20% of global oil supply, remains effectively closed. Oil prices fell sharply on the ceasefire announcements (including the largest single-day decline since 2020), then climbed back above $100 per barrel. Gasoline stayed above $4 per gallon throughout April. Consumer confidence falling to a 70-year low reflects this tension: households feel the gap between equity markets at all-time highs and an economy where filling the tank costs meaningfully more than it did six months ago.

The relief was real and the market priced it in quickly. But the structural energy disruption and its knock-on effects on inflation and consumer spending haven’t been priced out yet. In our view, oil staying above $100 with the Strait of Hormuz still closed makes a meaningful consumer spending slowdown in Q2 more likely than the equity market is currently pricing in (See our recent commentary on the Strait of Hormuz: Leads, Lags and the 4:10 to Yuma).

Read more: Leads, Lags and the 4:10 to Yuma