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Good Morning!
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Now let’s break down what actually moved markets this past week and what to watch next.
Market Recap
This was a week markets will remember. Stocks surged to record highs, oil dropped sharply, and earnings season kicked off stronger than expected. The relief that began with last week's ceasefire announcement continued to build, and by Friday the market had put together its third straight week of gains, its longest winning streak since October.
The biggest catalyst of the week came Friday morning, when Iran declared the Strait of Hormuz completely open for commercial traffic. Oil tumbled more than 10%, and the S&P 500 crossed 7,100 for the first time ever, with the Dow surging over 1,000 points and both the S&P 500 and Nasdaq hitting new all-time highs. Small caps led the charge, with the Russell 2000 hitting a fresh all-time high, while the Nasdaq posted its 13th straight day of gains, its longest winning streak since 1992.
The reopening of the strait is a meaningful development for the inflation outlook. Oil had been the single biggest driver of rising prices over the past several weeks, and with the waterway now open, the path toward lower energy costs has become more credible. The VIX, Wall Street's fear gauge, dropped 41% from its March peak, signaling significantly calmer conditions across markets. That shift in sentiment was visible across asset classes throughout the week.
Earnings season also provided a genuine boost. The major banks reported first quarter results this week, and the overall picture was one of resilience. The largest banks beat earnings expectations comfortably, with strong investment banking and trading revenues driving the outperformance. Additional financial companies reporting Friday also delivered better results than analysts had anticipated, further reinforcing the theme of a solid earnings season taking shape. The message from corporate America so far is that businesses have held up well despite the geopolitical turbulence of the past several months.
The Fed backdrop remains important context. Minutes from the March Fed meeting released this week showed that participants noted inflation remains above their 2% target, with some observing that further progress had been absent in recent months. With oil now pulling back and the Strait of Hormuz open, there is growing hope that the worst of the inflation pressure is behind us. But the Fed will need to see several months of data before it moves. Rate cuts remain on the table for later in 2026, though nothing is guaranteed.
What's Coming Next Week
Earnings season remains center stage. A wide range of companies across technology, industrials, and consumer sectors are set to report, giving investors a broader read on how the economy is holding up beyond the financial sector.
The Middle East situation will continue to command attention. The current ceasefire arrangement is still temporary, and negotiations toward a more permanent deal are reportedly progressing. President Trump signaled this week that a deal is taking shape and that the conflict should be ending soon. Any concrete progress toward a lasting agreement would be a further positive for oil prices, inflation expectations, and market sentiment broadly.
Investors will also be watching whether the record highs in stocks can hold. The S&P 500 has climbed 7% since April began, erasing most of a difficult first quarter. The rally has been fast and meaningful, which means expectations are now higher and any disappointment, whether in earnings guidance or geopolitics, could trigger a pullback.
The bottom line: markets are in their best position in months. Oil is falling, earnings are strong, and fear is fading. The key question now is whether the peace can hold and whether corporate guidance confirms the optimism priced into stocks.
We will continue monitoring these developments closely and keep you updated with new opportunities as they emerge.
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SmallCapStocks Team
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