Welcome to the monthly market update from Midland Wealth Management. I’m Jake Stapleton, Team Lead of Research, and today, I’ll share the Investment Team’s latest market and economic views.

Earnings Season and AI Investment

First-quarter earnings season is now largely complete, and the results were strong. S&P earnings grew at 27.5% on a year-over-year basis, far outpacing expectations.

The top-heavy growth story remains intact. The Magnificent Seven companies delivered earnings-per-share growth of roughly 63% year-over-year, compared to about 17% for the remaining 493 companies in the index. While solid broader market performance, this divergence captures how earnings growth remains dominated by major tech names.

Artificial Intelligence remains a key driver. US companies are expected to spend roughly $800 billion on AI infrastructure by the end of this year. Meta announced plans for $135 billion in spending, while Nvidia has committed roughly $150 billion to chip suppliers. For now, there are few signs of a pullback in AI-related capital spending.

International Equities

That AI narrative has moved beyond the United States. While the S&P 500’s monthly gains were strong, emerging markets finished up over 6%, led by Taiwan and South Korea. Taiwan Semiconductor, SK Hynix, and Samsung continue to benefit from demand tied to semiconductors, memory, and AI infrastructure. Emerging markets are now up more than 24% year to date, though those three companies have attributed to over 60% of the performance.

Consumer Sentiment and Energy

Turning to the consumer, the contrast between markets and household sentiment remains notable. Although equities are rallying, the University of Michigan Consumer Sentiment Index reached its lowest level in 75 years, falling below the lows seen during the Global Financial Crisis.

In our view, this reflects a K-shaped divergence between what markets are pricing and what many consumers are experiencing. Households remain focused on everyday prices, including gasoline, where the national average is around $4.50, which remains a visible pressure point for budgets. Meanwhile, economic growth continued with the spending from America’s uppermost quartile.

Geopolitically, the war in Iran remained at a stalemate for most of the month. The Strait of Hormuz was effectively closed. But late last week, the US and Iran reached a tentative 60-day truce renewal. The proposed extension would reopen the Strait and allow more time for nuclear discussions, while giving regional partners an opportunity to weigh in. Oil prices fell modestly after the announcement but remain elevated at around $84 to $92 per barrel.

Federal Reserve and Fixed Income

That backdrop remains important for monetary policy. Inflation was clearly at the forefront of the Fed’s concerns, and members of the FOMC appeared divided on the appropriate path for rates. Some believe hikes may be necessary given inflation risks, while others prefer patient as growth and labor conditions cool.

We also saw volatility in Treasury yields, particularly on the long end of the curve. Concerns around inflation, the fiscal deficit, and increasing yields among peer nations pushed the 30-year Treasury above 5%.

For those investors allocated to our portfolio strategies, the team was able to reallocate a portion of fixed income into longer-dated Treasuries as yields moved above 5.2%. As rates later declined, those clients benefited from both higher income and price appreciation, adding roughly 50 basis points of return to the fixed income sleeve since implementation.

Outlook

Looking ahead, our team remains focused on inflation, trade negotiations, energy markets, and the durability of the ceasefire in Iran. We expect continued volatility until there is greater clarity across those areas.

At the same time, earnings growth remains healthy and the AI investment cycle continues to support corporate profits. We remain focused on diversified, high-quality portfolios that can capture long-term opportunities while managing through periods of market uncertainty.

Thank you for joining us for this month’s market update. If you’d like to discuss what these developments mean for your portfolio, please reach out to your financial advisor or relationship manager.