Week ended April 3, 2026: stocks and bonds reclaim some lost ground

Investors got some relief last week from the battering that the Iran war has delivered to global stock and bond markets since it started.  US and European stocks increased 3%+ and US Treasuries rallied across the curve as yields settled.  Although many major stock markets were closed on Good Friday, the U.S. Treasury bond was open for a half-day session.  President Trump’s rather “meh” prime time address on Wednesday evening provided little in the way of new information about the war in Iran, and stocks were able to hold on to their weekly gains as the holiday-shortened week ended on Thursday.  With US equity markets closed on Friday, it was left to the US Treasury market to be the forum to express views regarding the better-than-expected March employment data released Friday morning.  US Treasury yields were 4bps to 5bps higher across the curve during Friday’s shortened session as the bond market gave back some its weekly gains, with the US jobs market continuing to exhibit surprising resiliency. 

Even before Mr Trump’s address to the nation on Wednesday evening, investors were anticipating a worsening of the global oil situation due to the ongoing closure of the Strait of Hormuz.  The US president continues to vacillate between bombing Iranian infrastructure and negotiating with a “willing Iranian regime”, the latter of which the Iranian leadership denies time and time again.  By this point, most investors know not to take Mr Trump seriously, recognising that he lives in a fantasy world that seems further and further removed from reality.  Perhaps oil prices are the best reflection of what investors really feel at the moment, with the price of WTI crude (US benchmark) increasing nearly 12% last week, reaching an intraday high of nearly $114/bbl on Thursday.  How do higher oil prices effect the American consumer?  Prices at the pump (AAA) in America rose to $4.10/gallon, +3% WoW and +28% in the past month.  30-year US mortgage rates have increased from 5.98% on February 26 to 6.46% on April 2 (source FreddieMac) which will inevitably filter through to the US housing market. 

For Fed watchers, the ICE FedWatch Tool is now projecting no reduction in the Federal Funds rate this year, reflecting the likelihood that inflation will increase in the coming months due to higher oil prices.  The Fed’s dual mandate ensures a counterweight in its battle against higher inflation, with full employment being the second leg of the Fed’s mandate.  However, as the March employment report showed, the US jobs market continues to be resilient, meaning the Fed will likely be stuck in neutral for the time being.  Other central banks are expected to increase their policy rates in the coming months to combat higher inflation (the sole mandate of most central banks), including the ECB and the Bank of England. 

From an investor’s perspective, things have generally worked like this during Trump 2.0:

• When the President is quiet, investors remain calm and markets are generally fine, often grinding higher.  

• When the President says or does something, investors tend to run for cover.  

In other words, risk markets have performed fairly well in spite of the non-stop barrage of comments coming from various members of the Trump Administration, much of which are exaggerations, misstatements or outright lies.  That’s simply Mr Trump’s style, and to remain sane and focused as an investor requires commitment and conviction in spite of the rapid-fire rhetoric that spews forth way too often for my taste.  Perhaps its best to ignore Mr Trump’s unusual post on his Truth Social site Sunday morning, which you can read below:

That aside, US economic data with respect to growth, jobs, and – most importantly – consumer spending (e.g. retail sales) remains generally positive in spite of the drag that is coming from higher energy prices.   Having said this, two US retailers – Nike and RH (formerly Restoration Hardware) –  delivered poor results and discouraging outlooks last week.  NKE is in the midst of strategy transformation as the sizzle has come off the company, not dissimilar to several other specialty retailers like LULU and SBUX, both US based but companies with a global presence.  RH is different, in that is largely a US domestic story.  I am not close enough to RH to know if the company’s poor results and revised (softer) outlook is specific to the company, or a reflection of consumer caution regarding consumer non-discretionary goods.  My fear in the case of all of these companies is that ongoing weakness is due to US consumers slowly pulling in their horns.

Of course, as investors recognise, the fly in the ointment will most likely be inflation due to higher oil prices, which has already surfaced in the recently released flash March inflation data for the Eurozone.    US CPI for March will be released this coming Friday (April 10) before the market opens, with analysts anticipating a sharp increase in headline CPI.  Bond investors already clearly smell inflation risk, but continue to vacillate between higher inflation expectations (favouring higher yields / lower bond prices) and slower economic growth (favouring lower yields / higher bond prices).   This tug-of-war largely ignores the clear bias towards higher yields driven by Trump’s errant fiscal policies, exacerbated by a war that is costing the country around $1 billion per day.  If you can bear it, check out the Iran War Cost tracker, which indicates that the war has cost the US $42 billion since it started.

MARKET DATA AND TABLES

Below are tables of key indices and asset prices that have been updated for the past week.

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