Markets recover war losses

Key takeaways

US stock markets surged to new record highs with the tech-heavy Nasdaq Index enjoying its best run since 1992 amid a de-escalation in the Middle East and plummeting oil prices.

S&P Index comes roaring back
The S&P 500 Index of US companies hit the first of several new record highs last Wednesday, on its way to three consecutive weekly gains of more than 3%. The Nasdaq tech index also passed a record high on the back of 13 consecutive daily gains, its best winning streak since 1992.

Global stock markets have now recovered the ground lost to the Iran war while the prevailing sentiment is that, despite Mr Trump’s swaggering rhetoric, the conflict has quietly moved to the ‘de-escalation’ stage. The course of the war has largely mirrored that of other geopolitical upsets. It took four weeks for markets to reach their nadir, and just two weeks for them to recover their losses. Within this, the S&P 500 Index rallied 10% in 10 days, its strongest bounce since the Covid rebound in 2020.

US banks lead the way 
Wall Street’s ‘Big Six’ banks set the tone for US earnings season last week, with record first-quarter numbers including a 30% jump in profits at Morgan Stanley. Although the banks made great trading gains due to the volatility triggered by the Iran war, they also stressed the continuing strength of US consumer spending.

This US earnings season is expected to be an exceptional one. There looks to be a cyclical upswing underway in the US economy amid clear indications that the Iran war has now been priced-in by markets. Elsewhere, unprecedented levels of corporate investment into the AI buildout continue while President Trump’s ‘One Big Beautiful Bill’ will help to bolster US companies, as will the first quarter’s weak US dollar. Upgraded earnings forecasts now point to 13% US earnings growth in the first quarter, followed by 20% in the second.

‘Big Six’ open latest US earnings season 
The ‘Big Six’ US banks – Goldman Sachs, JPMorgan, Citigroup, Wells Fargo, Morgan Stanley and Bank of America – kick-off the first quarter earnings season today. All are expected to report bountiful trading thanks to the volatility triggered by US foreign policy, the Iran war, and violently changing interest-rate expectations. Income from trading is expected to hit a 12-year high, while a rebound in dealmaking should significantly boost banking fees.

Although the banks’ earnings are seen as a bellwether for the wider US economy, more attention is likely to be paid when the Magnificent 7 tech giants report later in April. They account for a considerable slice of US earnings. Although investors continue to fret as to their AI spending plans, the US tech sector is still expected to lead US earnings growth this season.

UK banks called to number 11
The UK’s biggest banks announce their first-quarter results in the coming weeks, including details of how the Iran war has impacted their loan books. In the meantime, Chancellor Rachel Reeves has called a summit of bank leaders on Wednesday, the same day that Mr Trump’s latest ceasefire deadline expires.

Top executives from Barclays, HSBC, Lloyds, NatWest, Santander and Nationwide (the UK’s biggest building society) are heading to Downing Street to discuss potential ways to mitigate the economic pain of the war. The International Monetary Fund (IMF) recently downgraded its forecast for UK GDP growth to just 0.5% in 2026 – the biggest downgrade within the G7 economies.

Although last week’s GDP figures showed 0.5% growth prior to the war, this week sees the first UK inflation print to include post-war data with forecasters expecting a nasty jump to 3.3%.

Market moves

• Global stock markets surged 3.1% last week, led by US markets, as the ‘relief rally’ continued to gain momentum.
• The MSCI North America Index jumped 3.7%. Emerging market and European shares both gained north of 2%, while UK shares were only modestly positive.
• UK and US government bonds eked out small gains, thanks mostly to a 17% drop in the oil price. Gold also added more than 1% to be up over 10% in 2026.

What to look out for this week

• Kevin Warsh’s delayed nomination hearing to become Chairman of the US Federal Reserve next month, gets underway on Tuesday.

• Tuesday also brings UK average earnings and employment numbers and US retail sales and business inventory data.

• Wednesday will see the first UK inflation data since the start of the Iran war, followed by consumer confidence and retail sales numbers on Friday.

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