Diamond Capital Management's Market Commentary
April, 2026
Jeff C. Mantock, CFA, CMT
Vice President, Chief Investment Officer & Manager
Executive Summary:
- Higher oil prices (inflationary pressures) have reduced the prospects for a near-term Fed rate cut.
- Equity valuations have become more reasonable, and profit expectations remain strong.
- The U.S. economy continues to show resilience, and the latest ISM data points to expansion.
| The financial markets have been heavily influenced by headlines related to the war with Iran. Both stocks and bonds ended the first quarter lower, as higher oil prices and softer labor data raised concerns about inflation and the potential impact on the U.S. economy. The pullback in equities weighed on investor sentiment as higher oil prices also reduced prospects for a near-term Federal Reserve rate cut. Sentiment indicators, often viewed as contrarian signals, remain at depressed levels. We believe investors can look beyond near-term risks and maintain a constructive outlook for equities. Valuations that appeared stretched a few months ago have become more reasonable, profit expectations remain resilient, and optimism around artificial intelligence continues to support the longer-term growth narrative. Historically, markets have also tended to rebound following geopolitical shocks. |
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The S&P 500 posted its steepest monthly decline since March 2025. Investor anxiety was evident in the CBOE Volatility Index (VIX), which rose above 30 near the end of the month. In more stable markets, this indicator typically trades in the mid-teens. The VIX generally moves inversely to the S&P 500 Index, rising as investors increase their demand for put options to protect against downside risk. Historically, sharp spikes in volatility have often created attractive entry points for disciplined, long-term investors who can tolerate short-term fluctuations and capitalize on prices pressured by fear.
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| The U.S. economy continues to show resilience, with demand driven primarily by services even as inflation and rate uncertainty remain key crosscurrents. The latest ISM data point to expansion across both major sectors: the ISM Manufacturing PMI for March was 52.3 (above the 50 breakeven level), while the ISM Services PMI for February rose to 56.1, signaling a faster pace of growth in the largest part of the economy. Together, these readings suggest activity remains solid and broad-based, though the policy outlook will stay sensitive to any renewed price pressures. |  |
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