April 2026 End of Month Commentary

This One Time, At Band Camp

 "And this one time, at band camp..." Michelle in American Pie (1999)  

Executive Summary

• Risk-on, abruptly: Equity ETFs took in $106 billion in April, up 61% from March, and cash-like ETFs saw their largest weekly outflow since 2017. The mood flipped from defensive to offensive in a matter of days. 

• Hormuz still shut, oil sticky: The Strait of Hormuz remains closed, with prediction markets pricing only a 57% chance of normalized traffic before August. Brent above $100 keeps inflation on the table, even if today's economy is less oil-dependent than its 1970s version. 

• Fed in focus, not in motion: Markets price no change at this week's FOMC and roughly one cut by year-end. Our base case for an inflation reacceleration remains low-to-medium probability, but the implications would be severe. 

• Outlook intact: Earnings season is the next real test. Valuations have reset to more reasonable levels, and consumer sentiment is the data point we are now watching most closely. 

Performance

The Risk-On Reflip

There is no graceful word for what investor positioning did this month. Equity ETFs absorbed $106 billion in April versus $66 billion in March, the third-largest rotation into higher-risk assets in more than five years. Beneath the surface, flows tilted into cyclicals, growth, and AI-linked names while defensive sectors and low-volatility funds bled. Cash-like ETFs, which took in a record $20 billion in March as investors sought safety, reversed into roughly $5 billion of weekly outflows. That is the largest cash exodus since 2017. And it landed in the same window investors were supposedly worried about geopolitical risk.

So what: positioning has gotten less defensive quickly. That is friendly to momentum and unkind to anyone holding cash hoping for an entry point. It also means a bad earnings print or a fresh shock has more room to bite.

Hormuz, Oil, and a Fed That Would Rather Not Move

The Strait of Hormuz, which carries roughly a third of global seaborne oil, remains constrained. Brent above $100 is doing the work you would expect on inflation expectations, and BlackRock's fixed income team has nudged its year-end Core PCE forecast to 2.7%. The important caveat is that the U.S. economy is meaningfully less oil-intensive than it was during the 1970s shock. Energy is a smaller share of consumer spending, manufacturing is a smaller share of GDP, and the corporate sector is structurally less exposed to a single commodity input. That is not the same as immune. The Fed meets April 29. Fed Funds futures imply 0% probability of a move at this meeting, with the implied overnight rate drifting from 3.64% today to roughly 3.55% by December, or about one cut by year-end. That is a market saying: hold for now, ease later, and only if the data cooperates. We continue to view an inflation reacceleration as a low-to-medium probability event. If it lands, the implications would be severe across duration, multiples, and leverage-sensitive sectors.

So what: lean on the intermediate part of the curve, keep inflation-aware diversifiers, and avoid stretching for yield in long duration.

And This One Time, On Kalshi

While the Fed pages are getting written, retail investors are quietly pricing a different set of stories. Prediction markets have Kevin Warsh at a 98% probability of being confirmed as the next Fed Chair, the Strait of Hormuz at 57% to return to normal traffic before August, only a 44% chance of a U.S. and Iran nuclear deal before September, and 75% odds the Taylor Swift and Travis Kelce wedding happens in New York rather than Rhode Island. We list those side by side because that is how the average investor is consuming risk right now: the geopolitical, the procedural, and the genuinely silly all share the feed. Markets are not ignoring the serious items. They are weighing them next to everything else and determining that the path of least resistance is forward.

So what: when prediction markets and equity flows both shrug at geopolitical risk, the surprise is rarely that they were right. The surprise tends to be that they kept shrugging until they could not. 

Earnings, Sentiment, and What We Are Watching

The season is delivering. Through the first 139 of 499 S&P 500 names, aggregate EPS is beating consensus by 10.06% against a sales surprise of just 1.92%, the strongest blended earnings beat in the period Bloomberg tracks back to early 2024. This is a margin and operating-leverage story more than a top-line story, which is what we have been writing about for several quarters. Technology is leading at +22.27% earnings surprise, Materials at +29.06% (small sample), Communications at +15.84%, and Energy at +12.79%. Consumer Staples and Utilities are bringing up the rear at low single digits, but every sector is in the green on earnings. Consensus had the bar at roughly 12.5% EPS growth for the index and 40.9% for tech, and so far companies are clearing it. The uncomfortable companion to that is University of Michigan consumer sentiment at 49.8, a multi-year low, which is hard to reconcile with a market making new highs. 

S&P 500 Sales and Earnings surprise by sector, CQ1 2026, through 4/27 

Source: Bloomberg

We are not making major changes to the outlook laid out in our most recent Quarterly Positioning piece. We remain overweight U.S. equities with a preference for value, dividend yield, small cap, and AI exposures outside the obvious megacap names. We remain favorable on liquid alternatives, which proved their role in Q1. We remain neutral on fixed income, favoring intermediate duration and investment-grade credit. We remain underweight international, though we are watching the EM and EAFE rallies closely.

So what: earnings are doing the work to confirm the rally rather than just flows chasing it, but sales growth needs to eventually catch up to earnings growth, and a sentiment reading this weak rarely sits next to multiple expansion forever.

Stories From Band Camp

The defining feature of the moment is not any single narrative. It is the volume of them. Hormuz, Fed leadership, an Iran deal that may or may not come, an earnings season that needs to clear a high bar, a consumer that says one thing while equity f lows say another. Investors are choosing what to pay attention to, and right now they are paying attention to forward earnings. That can work for a long time, and it has worked recently. It also means a disciplined process matters more than a strong opinion. Stay diversified, stay invested, lean into breadth where valuations and earnings support it, and keep the diversifiers that are doing their job. We will keep telling you, this one time, at band camp. 

Louis Tucci; Partner | Senior Investment Advisor
Paulo Aguilar, CFA, CAIA; Partner | Senior Investment Advisor
Mark H. Tucker, CFA; Chief Investment Officer
Chuck Bettinger; Portfolio Manager

Securities offered through Arkadios Capital. Member FINRA/SIPC. Advisory services through Arkadios Wealth.

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