“Simple rules, followed consistently, beat complex plans followed occasionally.”
After a month to forget in March, the stock market came roaring back in April as investors appeared to overcome the initial fears associated with the Middle East conflict. Except for the MSCI EAFE, all the major stock indexes we follow produced strong monthly gains. Small Caps, Mid-Caps, and Emerging Markets have been leading the way for the year. The CRB Commodity Index was up an additional 7.5% in April on strength in the energy complex. Bonds were slightly higher, and the US Dollar weakened.
All data as of 05/01/2026, Source: Wells Fargo Investment Institute. An index is not managed and not available for direct investment. Past performance is not a guarantee of future results. [Wells Fargo Investment Institute, Inc. is a registered investment advisor and wholly-owned subsidiary of Wells Fargo Bank, N.A., a bank affiliate of Wells Fargo & Company.]
There is no denying that the US stock market has been incredibly resilient in the face of global adversity. Military operations in the Middle East have kept geopolitical risk elevated, creating an environment where energy markets remain volatile and supply concerns can flare up without warning. At the same time, inflation has proven more persistent than policymakers hoped, forcing the Federal Reserve to temper expectations for rate cuts and maintain a tighter stance longer than markets anticipated. In most cycles, that combination of geopolitical strain, higher energy costs, and restrictive monetary policy would be enough to cool investor enthusiasm.
Yet, even as trade and tariff policy disruptions continue to reshape global supply chains and complicate long-term planning for multinational firms, the market has shown a remarkable ability to absorb these shocks. Companies have adapted quickly, while consumers have remained surprisingly durable. Earnings have remained strong, with forward expectations increasing. Investors, in turn, have leaned into the strong corporate earnings, ongoing productivity gains, and the broader sense that the US economy remains sturdier than the headlines suggest.
Taken together, it’s a backdrop full of crosscurrents, but not one that has derailed momentum. The ability of businesses and households to navigate these pressures has reinforced confidence that the economy can withstand more strain than expected. And in a testament to that resilience—and to the market’s forward-looking nature—the S&P 500 has hit new all-time highs.
Still, just because the picture looks encouraging today, don’t get fooled into believing we are fully in the clear. We believe there are Several areas of concern on the horizon – issues that may ultimately fade into the background but could just as easily evolve into meaningful headwinds for markets later this year. Whether it’s renewed geopolitical escalation, a reacceleration in inflation, deeper-than-expected trade disruptions, or signs of consumer fatigue, any one of these factors has the potential to shift sentiment. It’s a reminder that resilience and risk often coexist, and both deserve attention as we navigate the months ahead.
Chart #1: www.stockcharts.com Data 08/14/2025 – 05/05/2026 as of 05/05/2026. An index is not managed and not available for direct investment. MA 13 = 13-week moving average MA 40= 40-week moving average
Geopolitics, Trade, and Inflation
From our perspective, the geopolitical landscape has shifted sharply following the Iran war and the effective closure of the Strait of Hormuz, one of the world’s most critical commodity corridors. Roughly 20% of global oil and natural gas, one-third of global fertilizer, and about one-third of global helium typically move through this narrow passage. With Iran blocking transit and the U.S. enforcing its own blockade, shipping has collapsed, creating what the International Energy Agency has called “the largest supply disruption in the history of the global oil market.”¹ This is not just an energy story. The shutdown is also constraining flows of fertilizer, ammonia, sulfur, helium, and even aluminum, all of which are essential inputs for agriculture, manufacturing, medical imaging, semiconductors, and industrial production.²
These disruptions are already feeding into global inflation. Fertilizer prices have surged – urea up 30 to 60% depending on the region. – increasing agricultural input costs and threatening food security across Asia. Helium spot prices have doubled, driven by Qatar’s temporary shutdown of liquefied natural gas production, which is a major source of helium as a byproduct. With the Gulf supplying roughly 20% of global seaborne jet fuel, Europe has been feeling the strain. Airlines are facing shortages, with some flights already canceled as inventories tighten, and there is no obvious solution to the supply issue.³ These pressures ripple outward: higher fuel costs increase freight rates, which in turn push up the cost of manufactured goods, chemicals, and consumer products.
For the U.S., the inflationary impact is indirect but significant. While the U.S. imports fewer goods directly from the Strait than Asia or Europe, it is deeply exposed to global commodity markets. As shortages develop abroad, prices rise everywhere. Analysts warn that the U.S. could face higher costs for aluminum, fertilizers (urea and ammonia), naphtha (a petrochemical that is a part of plastic and synthetic fiber production), and industrial gases, all of which feed into domestic manufacturing, agriculture, and transportation.⁴ Even if the Strait were to reopen immediately, we agree with the Atlantic Council’s assessment that damaged refining capacity and disrupted logistics could take months—or years—to normalize, meaning inflationary pressures may persist well beyond the immediate conflict.⁵
In short, the inflation story is not just about the price of gas. It is about a broad set of commodities whose supply chains have been abruptly severed. The longer the conflict continues, the more these pressures will build, raising costs for producers, squeezing consumers, and complicating central banks’ efforts to bring inflation back to target.
Chart #2: www.stockcharts.com Data 05/03/2021 – 05/05/2026 as of 05/05/2026. An index is not managed and not available for direct investment. MA 13 = 13-week moving average MA 40= 40-week moving average
The Consumer
The U.S. consumer remains the backbone of the economy—responsible for roughly two-thirds of total economic activity—and understanding their behavior is essential to understanding the broader outlook.
The consumer’s central role is clear in the latest GDP data: personal consumption expenditures accounted for 68.1% of U.S. GDP in Q1 2026, underscoring how heavily the economy relies on household spending.⁶ Even with geopolitical tensions and inflation pressures, consumer spending still grew at a 2% annualized rate in early 2026.⁷ This steady spending has been a key pillar of economic resilience, helping offset volatility in other sectors.
Yet sentiment tells a very different story. Consumer sentiment has fallen to historic lows, with the University of Michigan’s April reading dropping to 49.8—the lowest level in data back to 1978. This decline reflects rising concerns about inflation, geopolitical instability, and the economic fallout from the Iran war. The University of Michigan notes that sentiment deteriorated across income, age, and political groups, with year-ahead inflation expectations jumping from 3.8% to 4.7% in a single month, the largest increase since April 2025.⁸
The paradox is that Americans continue to spend even as they report feeling deeply pessimistic. This disconnect – record-low sentiment alongside steady consumption – suggests that behavior is being driven less by mood and more by strong balance sheets, rising wages, and accumulated wealth. In other words, consumers say they are worried, but their spending patterns show they remain willing and able to support economic growth. We believe this divergence is critical: if sentiment eventually pulls spending down, the broader US economy could lose its most important engine. For now, however, the consumer continues to carry the economy despite what the surveys suggest.
Looking Ahead
When you put all of these crosscurrents together – geopolitical instability, disrupted trade routes, rising input costs, and a consumer who feels worse than they spend – it would be easy to assume the stock market is headed for trouble. But markets rarely move in straight lines, and they certainly don’t always react the way intuition suggests. Corporate America just delivered a strong first-quarter earnings season, with results outperforming expectations across most market segments. That strength matters, and we believe it is the reason stock indexes have rebounded from the March 2026 lows. Over time, earnings remain the most reliable anchor for long-term equity performance, and for now, companies are proving they can navigate a complicated global backdrop.
We believe speculating on what might happen next is ultimately a fool’s game. Only time will tell us what truly matters. Markets have a long history of climbing walls of worry, and they often look past near-term noise far sooner than headlines do. The key is recognizing that resilience and risk can coexist, and that both are shaping the environment investors face today.
As we look ahead, we believe the second-quarter earnings season, which begins in July, will offer a far clearer barometer of where the consumer is headed and, by extension, where the broader economy may be going. Q1 told us that companies can adapt. Q2 will tell us whether households continue to spend through uncertainty or begin to show signs of fatigue. That, more than any single data point or geopolitical headline, will help determine the market’s trajectory in the second half of the year.
Final Thoughts
As hard as it can be, we suggest you ignore the noise produced by the financial news media. The core principles of long-term investing haven’t changed and continue to work for investors. Asset allocation and diversification continue to do the heavy lifting – spreading risk, smoothing volatility, and keeping portfolios aligned with your personal wealth plan. It’s easy to feel pressure to “do something.” More often than not, the most effective strategy is the one that avoids unnecessary complexity and stays grounded in a disciplined framework.
That’s why the quote at the beginning of this letter remains so relevant: “Simple rules, followed consistently, beat complex plans followed occasionally.” Markets will always offer reasons to second-guess your approach, and there will always be someone predicting the next crisis. We believe successful investing is not about reacting to every twist and turn. It’s about having a thoughtful plan, sticking to it through different market cycles, and letting diversification and time work in your favor.
As we look ahead, we’ll continue to review the data, the risks, and the opportunities without losing sight of the fundamentals that have guided investors successfully for decades. We believe a steady, disciplined approach remains the most reliable path forward.
As always, we’re here to help you navigate the path ahead—whether it’s updating your plan, rebalancing your portfolio, or thinking through the next chapter of your financial journey. If you have questions or want to explore your options, don’t hesitate to reach out.
If you would like to discuss your current strategy, or how to build such a strategy, Contact Our Team Of Financial Advisors Today!
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Wells Fargo Advisors Financial Network did not assist in the preparation of this report, and its accuracy and completeness are not guaranteed. The opinions expressed in this report are those of the author(s) and are not necessarily those of Wells Fargo Advisors Financial Network or its affiliates. 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.
Asset allocation and diversification are investment methods used to help manage risk. They do not guarantee investment returns or eliminate risk of loss including in a declining market.All investing involves risks including the possible loss of principal invested. Past performance is not a guarantee of future results.
Index returns are not fund returns. An index is unmanaged and not available for investment.
Dow Jones Industrial Average: The Dow Jones Industrial Average is a price-weighted index of 30 “blue-chip” industrial U.S. stocks.
S&P 500 Index: The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market value weighted index with each stock’s weight in the Index proportionate to its market value.
S&P Midcap 400 Index: The S&P Midcap 400 Index is a capitalization-weighted index measuring the performance of the mid-range sector of the U.S. stock market, and represents approximately 7% of the total market value of U.S. equities. Companies in the Index fall between the S&P 500 Index and the S&P SmallCap 600 Index in size: between $1-4 billion.
S&P Small-Cap 600 Index: The S&P SmallCap 600 Index consists of 600 domestic stocks chosen for market size, liquidity (bid-asked spread, ownership, share turnover and number of no trade days) and industry group representation. It is a market value-weighted index (stock price times the number of shares outstanding), with each stock’s weight in the index proportionate to its market value.
MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI.
MSCI World Index: The MSCI World Index is a free float-adjusted market capitalization index that is designed to measure global developed market equity performance.
MSCI EAFE® Index: The MSCI EAFE Index is designed to represent the performance of large and mid-cap securities across 21 developed markets, including countries in Europe, Australasia and the Far East, excluding the U.S. and Canada.
MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets.
The CRB (Commodity Research Bureau) Index measures the overall direction of commodity sectors. The CRB was designed to isolate and reveal the directional movement of prices in overall commodities trades.
Bloomberg Barclays U.S. Aggregate Bond Index: Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based measure of the investment grade, US dollar-denominated, fixed-rate taxable bond market.
NASDAQ Composite Index: The NASDAQ Composite Index measures the market value of all domestic and foreign common stocks, representing a wide array of more than 5,000 companies, listed on the NASDAQ Stock Market.
Russell 2000® Index: The Russell 2000® Index measures the performance of the 2,000 smallest companies in the Russell 3000® Index, which represents.
U.S. Dollar Index (USDX) measures the value of the U.S. dollar relative to majority of its most significant trading partners. The index is similar to other trade-weighted indexes, which also use the exchange rates from the same major currencies.
Technical analysis is only one form of analysis. Investors should also consider the merits of Fundamental and Quantitative analysis when making investment decision. Technical analysis is based on the study of historical price movements and past trend patterns. There is no assurance that these movements or trends can or will be duplicated in the future.
Stocks offer long-term growth potential, but may fluctuate more and provide less current income than other investments. An investment in the stock market should be made with an understanding of the risks associated with common stocks, including market fluctuations.
Investing in foreign securities presents certain risks not associated with domestic investments, such as currency fluctuation, political and economic instability, and different accounting standards. This may result in greater share price volatility.
Investments in fixed-income securities are subject to market, interest rate, credit and other risks. Bond prices fluctuate inversely to changes in interest rates. Therefore, a general rise in interest rates can result in the decline of the bond’s price. Credit risk is the risk that the issuer will default on payments of interest and/or principal. The risk is heightened in lower rate bonds. If sold prior to maturity, fixed income securities are subject to market risk. All fixed income investments may be worth less than their original cost upon redemption or maturity.
Investing in commodities is not suitable for all investors. The commodities markets are considered speculative, carry substantial risks, and have experienced periods of extreme volatility. Investments in commodities may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors affecting a particular industry or commodity. Exposure to the commodities markets may subject an investment to greater share price volatility than an investment in traditional equity or debt securities. The prices of various commodities may fluctuate based on numerous factors including changes in supply and demand relationships, weather and acts of nature, agricultural conditions, international trade conditions, fiscal monetary and exchange control programs, domestic and foreign political and economic events and policies, and changes in interest rates or sectors affecting a particular industry or commodity. Products that invest in commodities may employ more complex strategies which may expose investors to additional risks, including futures roll yield risk.
Robert I. Cahill, Partner
Rob.Cahill@wfafinet.
Jonathan D. Soden, Managing Partner
Jon.Soden@wfafinet.com
Cassandra Queen, CFP®,ChFC®, Senior Wealth Planner
Cassandra.Queen@wfafinet.com
Susan C Schupp, MBA, Senior Wealth Planner
Susan.Shupp@wfafinet.com