April 2026 Market Update

At the April FOMC meeting the committee decided not to cut interest rates, leaving the federal funds effective rate at 3.50%-3.75%. The level of bank reserves and the Federal Reserve’s balance sheet has risen since the end of 2025, but recently pulled back, signifying tightening of liquidity in the banking system and a scarcity of cash. Kevin Warsh, the new Fed Chair, desire to shrink the Federal Reserves balance sheet will no doubt be tested, as current financial conditions beg for balance sheet expansion and a larger asset purchase program to prevent financial markets from experiencing extreme turbulence.

Reserve Balances and Federal Reserve Balance Sheet

As previously mentioned in the December 2025 Market Update, added liquidity to the banking system via the new small asset purchase program (QE) the Fed began at the December FOMC meeting has not assisted employment conditions, as the job hiring rate continues to decline to new lows.

Hiring Rate

The market sees fewer interest rate cuts this year, if any, and occurring later in the year than previously expected. Rising commodities prices such as oil and gas along with rising interest rates have shifted the markets’ view. Mortgage rates have risen higher, dampening hopes of a strengthening housing market this spring. The share of new homes for sale which have already been completed has risen to its highest level since March of 2009. Longer run inflation expectations have also begun to rise. American households are getting squeezed with rising costs for energy, housing, and healthcare. The U.S, savings rate fell to 3.6% in March, one of the lowest readings in history. Real personal income growth rate has fallen into negative territory (-.05%). Since 1960, there have only been 9 periods where the real personal income growth rate fell into negative territory, 7 out of 9 of those periods coincided with an economic recession.

Percentage of Americans who say their financial situation is getting worse

Newly Constructed Completed Homes for Sale

Inflation Expectations

U.S. Personal Saving Rate

U.S. Real Personal Income Growth Rate

University of Michigan Index of Consumer Confidence has fallen to an all-time low, even as the stock market has risen this past month back out of a bearish trend, all the way back up to new all-time highs. An unprecedented amount of gambling and complacency is taking place. The market believes if stock prices decline the government will quickly increase spending and/or the Fed will increase its balance sheet to keep money flowing and credit creation expanding no matter what the cost to the rest of the economy. The only way interest rates and mortgage rates are going to substantially decline is with a strong economic downturn and/or recession, combined with fiscal discipline.

University of Michigan Consumer Sentiment

An economic transition is underway, and there is high complacency in financial markets amidst extremely high stock and real estate market valuations. For those who do not understand the real economy, its real problems, and believe all is well simply because the prices of assets are up, the following charts are important to consider when choosing their asset allocation mix. Investing in the S&P 500 at a price to earnings ratio of 22x or greater has historically led to a negative 10-year return. The valuation at which an investor enters the stock market significantly matters to their performance and return.

S&P 500 10 Year P/E Ratio & Buffett Indicator Standard Deviation From Long Term Trend

Bloomberg Average Percentile Valuation Mix

Stock Market CAPE Valuation and Lost Decades since 1900

Our MacroVex Capital, S&P 500 fair value estimate model currently indicates fair value for 2025 earnings of $272 and 2026 earnings of $312 between 4,155 and 4,920, down -42% and -32% from the S&P 500, 2026 April closing price of 7,209.

We believe throughout the rest of 2026 there will be major fiscal and monetary changes that provide great investment opportunities. Our recommendation is to position portfolios to endure a recession, in a defensive manor, risk off, cash, T-bills, money market funds, short to mid-term 1-10 year U.S. treasury bonds and 10-30 year U.S. treasury bonds at positive carry, 10-year minus 2-year yield curve re-steepening, 10-year minus 3-month yield curve re-steepening, Short USDJPY from 153, and select low duration U.S. equities.

Getting paid to wait for growth assets to be priced at discounts, while being positioned to benefit from bond price appreciation as interest rates decline from downward economic pressure, continues to be a profitable and rewarding strategy. We remain patient and focused on managing risk through 2026.

Disclosure: Investing involves risk, including the possible loss of principal and fluctuation of value. Past performance is no guarantee of future results. This letter is not intended to be relied upon as forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date noted and may change as subsequent conditions vary. The information and opinions contained in this letter are derived from proprietary and nonproprietary sources deemed by Macrovex Capital, LLC to be reliable. The letter may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projection, and forecasts. There is no guarantee that any forecast made will materialize. Reliance upon the information in this letter is at the sole discretion of the reader. Please consult with a Macrovex Capital, LLC financial advisor to ensure that any contemplated transaction in any securities or investment strategy aligns with your overall investment goals, objectives, and tolerance for risk. Additional information about Macrovex Capital, LLC is available in its current disclosure documents, Form ADV and Form ADV Part 2A Brochure, which are accessible online via the SEC’s investment Adviser Public Disclosure (IAPD) database at www.adviserinfo.sec.gov, using CRD #300692. Macrovex Capital, LLC is neither an attorney nor an accountant, and no portion of this content should be interpreted as legal, accounting or tax advice