By Thierry Hasse, Chief Investment Officer
Elevage Partners | The Week Ending April 17, 2026
The Engine Underneath the Rally
U.S. equity markets posted an extraordinary week. The S&P 500 advanced more than 9% to close Friday at 7,126.06, decisively above the 7,000 threshold for the first time in its history (source: Yahoo Finance). The Nasdaq Composite moved into double-digit gains for the month of April and recorded its twelfth consecutive positive session, its longest winning streak since 2009 (source: Yahoo Finance).
What actually sustains this market, with or without a durable resolution of the U.S.–Iran conflict, is a U.S. corporate earnings engine running at a pace more typical of early-cycle recoveries than of a mature expansion nearly four years in. The ceasefire was the spark. The earnings power is the fuel. That engine was running before the ceasefire headlines, and in our assessment, the fundamentals sustaining it sit well upstream of the current news cycle.
It is worth keeping the rally itself in perspective. Despite April’s strength, the S&P 500 is up only about 4.1% year to date, calculated from the Dec.31, 2025 closing level of 6,845.50 (source: CNBC). Short-term moves feel decisive in the moment. Over a longer horizon, they often compress into something far less dramatic.
Earnings Provide Real Support
With roughly 10% of S&P 500 companies having reported as of April 17, both the rate and magnitude of positive earnings surprises are running above recent historical averages. Blended first-quarter earnings growth now stands at approximately 13.2% year over year, above the 12.8% estimate prevailing at the start of the year, and on pace to mark the sixth consecutive quarter of double-digit earnings growth for the index (source: FactSet Earnings Insight, April 17, 2026).
Nine of 11 S&P 500 sectors are projected to deliver year-over-year earnings gains, led by information technology, materials and financials (source: FactSet). Individual results have reinforced the trend. Morgan Stanley reported first-quarter earnings of $3.43 per share on $20.58 billion in revenue, handily beating consensus (source: Morgan Stanley Q1 2026 earnings release). Bank of America similarly surpassed expectations (source: Bank of America Q1 2026 earnings release).
What stands out to us is not just the strength of these numbers but their context. Growth at this level is more typical of early-cycle recoveries than of a mature expansion now approaching four years in length. That is an unusual combination, and in our view it reflects durable drivers rather than a late-cycle sugar high: continued capital expenditure reinvestment, productivity gains associated with AI, and the lingering effects of prior fiscal stimulus. Analysts are now projecting full-year 2026 earnings growth of approximately 18% for the index (source: FactSet Earnings Insight, April 17, 2026).
The earnings engine is running on factors that sit well upstream of any single geopolitical headline. In our view, a durable resolution of the U.S.–Iran conflict would remove the remaining overhang and allow that earnings engine to express itself more fully in prices. A reversal in the ceasefire would pressure sentiment but would not change the underlying business quality of the companies driving these results.
Inflation Rises, and the Fed Stays Patient
The March Consumer Price Index rose 0.9% month over month, the largest monthly increase since June 2022, pushing the annual rate to 3.3%, a near two-year high and a notable step higher from the 2.4% readings in January and February (source: Bureau of Labor Statistics). The driver was energy, with prices up 12.5% year over year, reflecting the earlier disruption in oil markets tied to restricted traffic through the Strait of Hormuz (source: Bureau of Labor Statistics).
The underlying inflation picture was more measured. Core CPI, excluding food and energy, rose 0.2% for the month and 2.6% annually, with continued moderation in shelter and services (source: Bureau of Labor Statistics).
The Federal Reserve held rates steady at 3.5% to 3.75% at its March Federal Open Markets Committee meeting while emphasizing flexibility. The March minutes, released April 8, showed that some participants had raised the possibility of a rate hike if energy-driven inflation proved persistent (source: Federal Reserve, March FOMC minutes). The path forward for monetary policy remains highly conditional. If oil prices rise meaningfully again, the Fed could face a difficult balance between inflation pressures and slowing growth.
The Engine Runs Independent of the Headlines
Last week offered both strong conviction and a clear reminder of what remains unresolved. The ceasefire is fragile, measured in days, sometimes hours, with a critical shipping corridor that has opened and closed multiple times in recent weeks.
The optimism behind the rally, in our assessment, is not fragile. It is anchored in U.S. corporate earnings power that continues to surprise to the upside, a force that exists largely independent of the geopolitical headlines. That is the message worth taking away from this week. Markets will remain sensitive to each update from Washington or Tehran, and prices will move with them. But value, over time, is moved by earnings.
The engine is running. Our job as long-term investors is not to get the next headline right. It is to stay positioned in the businesses generating that earnings power, and to let the engine do its work.