From the Desk

While the energy shock remains unresolved, equity markets seemed to have moved on, seemingly concluding that the path from here will be more about diplomacy than escalation. Equity volatility has abated and is now back to prewar levels. And with earnings reporting season in flight, the mood has shifted to focusing on margins and profits.

Analysts expect year-over-year earnings to be up over 12%. The early returns show they could well exceed that. Mega-cap technology companies continue to be an important part of this earnings surge. Key chip designers and model builders are leading the pack.

Away from technology, the median S&P 500 Index company is also churning out strong earnings. Key sectors like financials, industrials, consumer discretionary, materials and, of course, energy are all performing well. Part of all this success is innovation, but also the ability of companies to adopt as shocks hit.

But above all that, the consumer is still the star. According to surveys, consumer sentiment is at its lowest in almost 50 years as households worry about affordability. But consumers are still spending as unemployment remains low.

So where do we go from here? Both the U.S. and Iran have ample reasons to end their reciprocal blockade, yet still seem far apart on an agreement. While estimates vary, it seems like energy inventories will be drawn down by the middle to the end of May. There is still time for diplomacy to do its job, but the clock is quickly ticking down.

Sources: Bloomberg, The Financial Times, 2026. 

Spreads across investment grade and high yield credit have retraced most of the widening we experienced as a result of the war in the Gulf and risks around private credit. From a fundamental perspective, there’s some solid rationale for these moves: so far, earnings expectations and operating margins are expected to hold up well and, by extension, credit leverage remain stable for the medium term. At the same time, as with most dislocations the subsequent rally in risk assets is often uneven. That’s true in equity markets as well as credit markets, generating idiosyncratic opportunities to reduce or increase exposure to certain names and subsectors of the credit and structured credit markets.

Some specific credits and subsectors of investment grade markets have actually reached new cycle tight spreads, creating opportunities to swap into better opportunities. Strong fundamental research is critical right at this moment in finding and executing on those ideas. The healing process takes time and creates potential returns for active credit management.

Source: Bloomberg, 2026.