Markets surged to record highs this week as signs of de‑escalation in the Middle East boosted investor confidence even as the war with Iran continued to lift energy-driven inflation and weigh on the housing market. Core inflation remains tame, consumers appear resilient, and strong Q1 earnings could extend equities record-setting run.
Economic Highlights:
- The conflict with Iran continued to push wholesale prices higher in March. Producer prices rose 0.50%, matching February’s increase. Energy costs were the main driver, up 8.50%. Core prices, which exclude volatile food and energy, rose just 0.10%. Services prices, a key focus for Federal Reserve policymakers, was flat month-to-month.
- Existing home sales fell to a nine-month low in March amid tight inventory and growing concerns over the labor market. Home sales fell 3.60% month-to-month to a seasonally adjusted annual rate of 3.98 million units. Meanwhile, inventory stood at 4.1 months, below the six to seven considered to be a healthy balance between supply and demand. As supply remained tight, median existing home prices rose 1.40% from a year ago to $408,800.
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This week’s earnings reports reveal a corporate environment that remains remarkably steady despite persistent high interest rates and global instability, with major financial institutions providing a positive narrative during their analyst calls. Executives at JPMorgan, Bank of America, Wells Fargo, and Citigroup uniformly characterized the American consumer as healthy, noting that spending levels and credit quality have held firm and shown few signs of stress despite problems in the separate private credit market. Smaller firms such as Ally Financial and F.N.B. reinforced that narrative, reporting that their loan portfolios and customer bases have navigated recent economic turbulence without major stress. The recurring theme across calls was one of endurance and “resilience,” but executives balanced their optimism with caution regarding geopolitical tension and energy costs, that fits a “steady-as-she-goes” outlook rather than a full-throttle expansion.
Markets Rally to New Highs as Middle East De‑Escalation Boosts Investor Confidence
Stocks were in rally mode this week with the S&P 500, Nasdaq Composite, and Russell 2000 Index hitting all-time highs on Friday, adding to their strong gains this week on optimism for a resolution to the Middle East conflict. On Friday, investors sent the Dow Jones Industrial Average surging as much as 1,000+ points on reports Iran had declared the Strait of Hormuz “completely open” on the heels of a ceasefire between Israel and Lebanon. While ships remain hesitant to move, and the U.S. continues to maintain its blockade, Wall Street interpreted the announcement as a positive first step in diplomacy, betting that an agreement will be worked out between the U.S and Iran as well as Israel and Lebanon. The positive turn in geopolitical events comes as the impact from higher energy has started to surface, with topline inflation marching higher in March. However, core prices – which exclude volatile food and energy – suggest underlying inflation remains well under control. This may influence the Fed policymakers to consider lowering interest rates in future quarters which would be a big help to consumers. The housing market in particular has struggled to gain traction during the all-important spring buying season largely due to high interest rates and worries over the labor market.
Despite no deal having emerged between the U.S. and Iran during last week’s face-to-face meeting, the re-opening of the Strait of Hormuz and on-going discussions signal meaningful progress towards an ultimate peace deal which appears to have removed a key risk to the global economy. Investors were quick to move on the news, pushing the indices higher for the week. The S&P 500, Nasdaq, and Russell 2000 rose 4.54%, 6.84%, and 5.56%, respectively. The market’s record-breaking run not only erases the war’s market losses but essentially brings us back to where we were in late February in terms of sentiment indicators and valuation. For stocks to continue hitting higher highs, the Q1 earnings season will be critical. In terms of sheer volatility, the tech sector has driven much of the upside action since it had experienced the sharpest losses initially with the Nasdaq in correction territory (down -10% from its peak) as recently as March 30th. Tech earnings, dominated by chipmakers and hyperscalers, are anticipated to remain strong in the first quarter and throughout the year as much of the year’s AI capital expenditures are already locked in and as mega cap tech companies compete for AI supremacy. The tech sector alone can’t do the heavy lifting, however. Consumers, who account for nearly seventy percent of GDP, will need to do their part to keep economic momentum going. Despite a messy macroeconomic backdrop filled with geopolitical uncertainty and sticky inflation, the early indications from earnings calls is that the consumer has continued to step up. Major U.S. banks have report that the consumer remains resilient and on solid financial footing, exhibiting both steady spending and stable credit quality. That backdrop helped banks report strong top and bottom line earnings. Wall Street forecasters are upbeat as well, raising their S&P 500 earnings growth forecasts for the quarter to 16%+ from early estimates of 13.20%. An end to the war could provide an additional driver by providing emotional lift and unlocking additional spending as the consumer preps for the busy summer travel season.
The Week Ahead
Key reports include retail sales, S&P Flash PMI, and consumer sentiment.
The Happiest Cows on Earth
This time of year marks a Spring tradition in Sweden known as Kosläpp (KOOH-slep), which translates to the releasing of the cows. Kosläpp is when farmers let their dairy cows out onto pasture after being kept inside barns and stables during the cold winter months to keep them protected from the elements. The great moove-out occurs from April to May at farms across Sweden.
Kosläpp has become a beloved and popular event with farms inviting the public to come view the spectacle and celebrate the start of spring and warmer weather. The event was previously an agriculture community gathering. In recent years, milk farms across Sweden have seen a growing number of people attending. Last year, alone, dairy cooperative Arla Foods saw around 165,000 people flock to their farms across the Scandinavian country to watch the cows, frisky with excitement, race out into the sun and the lush summer pastures. While the events are free, tickets are required for entry and often sell out within minutes. Every year, tens of thousands of people make the trek to the countryside to watch the cows joyfully run out into the fields, and the cows run faster than people might expect. After spending months indoors, the cows do a “happy dance” where they jump, kick, and leap for joy. Some even leap sideways or spin around. It looks unusual, but it’s normal behavior — the bouncy bovines are excited to have wide open spaces, fresh grass, and sunlight. We can only imagine that it must feel “udderly” liberating.
Sweden has around 1.5 million cattle, and around 320,000 of those are dairy cows. The country’s animal health and agriculture laws ensure all cows are allowed to graze outside in summer. You can view one of many links to these happy cows frolicking for the crowds at Kosläpp events here and in a video from a USA Today article here.
This year, cow release events will take place at around 30 farms across Sweden between mid-April and late May, starting in southern Sweden and continuing northward through the country as spring arrives in different regions.
The cows are released over the course of 20-30 minutes to give spectators plenty of opportunities to enjoy the full Kosläpp experience. Visitors can expect more than just the cow release itself. Many farms turn the event into an all-day celebration with pony rides, tractor tours, games, hands-on educational activities, and plenty of chances for attendees to discover what life is like on a farm. Guests are encouraged to bring a picnic or they can purchase local food and treats, making the event a long-awaited Spring tradition.
The event has a Swedish phrase associated with it, “gå glad som en kalv på