Kristy
Q1 started strong, but March ushered in a sharp rotation across asset classes, with equities under pressure, rates rising, and inflation expectations repricing higher amid an energy-driven supply shock.
We have three key takeaways as we look ahead to April:
- First, we know that geopolitical risks can create supply chain disruptions that take time to unwind. We’ve seen impacts in energy markets, but believe there may be second-order effects to come.
- Second, the Fed’s trajectory moved from cuts to caution. Rate expectations have turned more hawkish, and markets are reinforcing a higher-for-longer policy backdrop.
- And finally, we see select opportunities for investors amid the sell-off.
Faye
Middle East conflicts have driven oil prices above $100 for the first time since 2022 as flows through a critical global energy artery remain constrained. The Strait of Hormuz is a chokepoint for global energy flows – over 30% of global seaborne oil pass through the Strait, and nearly 25% of LNG and jet fuel.
And importantly, the Strait of Hormuz isn’t just critical for oil, but it’s also important for industrial inputs like petrochemicals and fertilizers. So distributions can ripple across global supply chains, outside of just energy.
Kristy
Markets have repriced the Fed’s path – dialing back cuts, and even pricing in a small chance of rate hikes.
Our base case still looks for Fed easing this year, but a longer-term inflation shock could challenge that view.
The recent market selloff has reset valuations. Prices have come down at the same time earnings have continued to move higher – since the start of the conflict, 2026 EPS forecasts for the S&P 500 have increased by 3%. Coming into 2026, the S&P 500 was trading at a 22x forward P/E ratio. Today, that has fallen to just 19x… below its 5-year average.
Faye
We’ll pull this all together:
- We see value in staying invested throughout volatility, and we think the recent pullback can offer better entry points for
- We remain convicted in AI. AI themes are forecasted to contribute nearly half of S&P 500 earnings growth in 2026 – and that's while many AI stocks are trading well below recent highs.
- And finally, we believe diversifiers like liquid alternatives can be used to seek improved portfolio outcomes – particularly at a time when stock-bond correlations remain unreliable.
Check out the full Advisor Outlook for more of our best thinking and reach out to your local market team or call 877-ASK-1BLK to dive deeper into any of these themes.
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