Weekly Investment Update (04/24/2026)

Markets are beginning to look past the latest geopolitical shock and refocus on the sturdier parts of the investment backdrop. The ceasefire between the U.S. and Iran appears to be holding for now, and reports that negotiations could resume shortly have helped reinforce the view that this episode is more likely to fade into a manageable source of volatility than evolve into a lasting macro disruption. That shift in tone has mattered because the underlying data have remained notably firm. First-quarter earnings growth is now tracking at just above 15%, with roughly 83% of companies that have reported earnings as of this date beating expectations and aggregate surprises running at more than 13%. AI remains a major source of support, particularly across semiconductors and infrastructure, where demand trends continue to exceed expectations and reinforce the market’s leadership structure.

The broader economy has also offered more stability than sentiment surveys alone would suggest. March retail sales rose 1.7% month over month, the strongest gain since January 2023, while the control group that feeds into GDP increased 0.7%. Meanwhile, initial jobless claims of 214,000 are still consistent with a labor market characterized more by hiring caution than widespread layoffs.

Said simply, the larger takeaway remains unchanged: While geopolitical and policy headlines can still create turbulence, the combination of resilient earnings, steady spending, and continued AI-led investment suggests a market environment that remains more durable than fragile.

Warsh Outlines New Fed Approach

What is happening: Kevin Warsh, nominated to serve as the next chair of the Federal Reserve, appeared before the Senate Banking Committee this week for his confirmation hearing. In his first major public appearance since being nominated, Warsh outlined several potential changes to the Fed’s policymaking framework. He called for less emphasis on forward guidance, a new framework for monitoring inflation, and a measured reduction in the Fed’s balance sheet. Warsh linked forward guidance to prior policy missteps and argued for scaling it back or potentially eliminating elements such as the Fed’s Summary of Economic Projections. He also expressed a preference for more open-ended and less scripted dialogue that allows for internal dissent.

Warsh argued that current inflation measures are imperfect and indicated a preference for trimmed-mean inflation, which excludes more volatile price moves to assess underlying trends. Core PCE, which excludes food and energy prices and is the Fed’s preferred inflation gauge, is currently running at 3% year-over-year. He added that one of his priorities would be to work with government agencies and the private sector to collect broader datasets of prices. Warsh, a longtime critic of the Fed’s large balance sheet, stated it should be reduced gradually to avoid disrupting financial markets.

On Friday morning, the Department of Justice officially dropped its investigation into Jerome Powell, a previous roadblock for Warsh’s confirmation. Republicans on the Senate Banking Committee are broadly supportive of Warsh’s nomination, but Senator Thom Tillis (R-NC) has previously stated he would block any Fed nominee until the Department of Justice Investigation is resolved. If the resolution is seen as final by Tillis, it may provide a path for the Senate Banking Committee to vote on Warsh’s confirmation as soon as next week and increases the likelihood that he will be confirmed by the broader Senate by the time Chair Powell’s term is up on May 15.

Why it matters: The hearing offered the clearest view yet of Warsh’s views and how a Fed under his leadership may differ from the status quo, particularly in policy and inflation measurement. That said, Warsh would still need to build consensus among Fed officials, as monetary policy decisions require a simple majority. While the chair is an important spokesperson for the Fed, its consensus approach to policymaking makes it unlikely that monetary policy will be adjusted without economic rationale.

While Warsh did not explicitly comment on his outlook for interest rates, he struck a constructive tone on the disinflationary potential of artificial intelligence, noting its importance for both inflation and the labor market. In the near term, elevated energy prices tied to the Middle East conflict are likely to keep the Fed on hold until there is greater clarity on the economic impact. We continue to believe the bar for rate hikes remains high, given the adverse growth impact and temporary inflation impact of higher energy prices. Our base case remains that tensions with Iran ease in the coming months, allowing the Fed to resume rate cuts before year-end. A Warsh-led Fed does not change that view.

Tariff Refunds Offer Limited Near-Term Inflation Relief

What is happening: Starting this week, companies that paid the Trump administration’s International Emergency Economic Powers Act (IEEPA) tariffs can apply for refunds following the February 20 Supreme Court ruling that the law does not authorize the president to impose tariffs. Valid claims are expected to be paid within 60 to 90 days. More than $160 billion in tariffs are estimated to be eligible, with over $120 billion already claimed.

Separately, earlier this month, the Trump administration increased tariffs on industrial metals under Section 232, which states that the president can impose tariffs on foreign imports deemed a U.S. national security risk. Steel, aluminum, and copper products are now taxed on their full customs value rather than just the embedded metal content, likely increasing the effective tariff burden for many importers.

Why it matters: The net effect of this month’s tariff developments is likely favorable for the broader economy, though the near-term impact on inflation should be limited. While research from the National Bureau of Economic Research (NBER) suggests U.S. importers bore most of the IEEPA tariff burden, the overall weighted average tariff rate (effective tariff rate) on U.S imports has only declined slightly following the ruling. As a result, many companies are expected to retain the majority of their refund proceeds to offset future tariff costs rather than pass savings through immediately. This suggests only a marginal disinflationary effect in the near term. Looking ahead, Section 122 tariffs, which impose a 10% baseline tariff on most trading partners, are expected to expire on July 24, 2026. The overall effective tariff rate could decline more meaningfully if these tariffs are not replaced by tariffs under new justifications. This is a development we are closely monitoring, and it could have a more noticeable impact on inflation during the second half of the year.

For earnings at the individual company level, there is clearer dispersion. Companies facing meaningfully lower tariff rates after the Supreme Court ruling should see some cash-flow and margin tailwind. On the other hand, companies with similar or higher rates than before could remain under pressure despite receiving refunds. For example, some firms that rely heavily on imported steel, aluminum, or copper may face an even more challenging margin squeeze than they did last year.

For overall U.S. economic growth, the likely effect is positive but modest. The refunds should ease financing strain and repair balance sheets, especially for companies with low pricing power. At the same time, the refunds are not expected to translate into corporate spending sprees or large price cuts for consumers. On balance, the refunds should more than offset the impact of the revised metal tariffs, but the aggregate growth effect is still anticipated to be incremental rather than transformative.