Stock markets are off to a very strong start to the second quarter of 2026, having recovered all losses stemming from the conflict in the Middle East and then some. We recently highlighted how April is historically one of the strongest months of the year for the stock market, and U.S. stocks just delivered their strongest monthly performance since 2020. Despite the ongoing conflict in the Middle East, investors have quickly shifted their focus from the economic impact of the war with Iran to a very strong earnings season. Over 60% of the S&P 500 index constituents have reported first quarter results, and even amongst an increasingly challenging backdrop for global economic growth, the results have been encouraging.
While earnings season isn’t over, the S&P 500 so far is beating Wall Street expectations by the widest margin in nearly five years and is shaping up to officially be the sixth consecutive quarter of impressive double-digit earnings growth. Following the March pullback from the conflict in the Middle East, an incredible amount of optimism was placed not only on a swift resolution to the war, but also on the expectation that corporations would remain resilient throughout the challenges stemming from this war. This overall optimism helped the S&P 500 recover all losses since the Iran conflict began in just nine trading sessions and helped propel the market to new all-time highs.
Earnings season has also helped investors understand where opportunities may lie geographically, as energy supply chains remain largely upended.
So far for Q1 2026 earnings, the aggregate earnings surprise percentage for the S&P 500 is 20% above expectations – the largest margin over expected earnings growth in years and one that dwarfs non-U.S. counterparts.
For example, the Stoxx Europe 600 has managed an aggregate profit of 3.9% while the MSCI World Ex-U.S. is slightly higher at just under 5%.
This gap not only reflects a far better earnings season for the U.S., but also its energy-independent economy providing insulation from the threat of rising oil prices. After U.S. stocks started the year underperforming their global counterparts, investors have recognized this opportunity, and U.S. stocks have started to outperform non-U.S. stocks once again.
Despite a resilient earnings season, a familiar headache for investors has resurfaced: concentration. The risk of sharp, violent moves is heightened with returns once again highly concentrated and momentum stocks driving the rally. The U.S. rally has been almost entirely driven by mega-cap technology, with seven stocks having generated around 80% of S&P 500 returns year to date. The story is similar in Europe as well, with six stocks generating nearly 90% of Stoxx Europe 600 returns. Some of this may be justified, as the strongest positive earnings revisions are within the technology sector across both the U.S. and Europe, but investors are once again faced with the tradeoff between diversification and participating in this momentum-driven rally.
The March pullback and subsequent April recovery is a perfect example of when to “stay the course” as an investor with long-term priorities. As your advocate, the JNBA Investment Committee continues to monitor the market environment diligently, remains committed to keeping you informed, and emphasizes the importance of discipline with long-term decision-making through periods of challenging market performance. We encourage you to reach out to your JNBA Advisory Team with any questions.
Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from JNBA Financial Advisors, LLC.
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