Weekly Investment Update (05/01/2026)

The market’s instinct may be to treat any renewed military action with Iran as an automatic escalation. This time, the more important question may be whether a final burst of force is actually intended to create an exit. If Washington is again weighing strikes, the more plausible interpretation may be that the U.S. is looking for a way to close the chapter: a limited, high-visibility action that allows the White House to claim strategic success and move the conflict toward conclusion. Counterintuitively, contained military escalation may prove less economically damaging than a drawn-out standoff centered on shipping disruptions, blockades, and a lingering risk premium across energy markets. Our base case remains that an agreement of some kind will be reached as Iran is now risking complete economic collapse within days or weeks as oil storage runs out and wells are shuttered.

Markets have already shown a willingness to embrace that possibility. U.S. equities staged an exceptionally strong rebound in April, with the S&P 500 rising nearly 10.5% for its best month since November 2020, while the Nasdaq delivered its strongest monthly gain since April 2020. Leadership was especially powerful in semiconductors, where the SOX surged roughly 38.5%, and the largest technology companies also reasserted themselves, supported by persistent enthusiasm around AI compute and infrastructure spending. That rally was helped by the ceasefire, but it also reflected a market increasingly anchored by durable themes beyond the conflict: a still-resilient consumer and an economy that continues to expand despite persistent geopolitical noise.

Federal Reserve Leaves Rates Unchanged at Powell’s Last Meeting as Chair

What is happening: The Federal Reserve (Fed) left interest rates unchanged at 3.75%, as expected, at its April meeting. There were limited changes to the policy statement amid still elevated uncertainty in the Middle East, and the Fed retained its implicit easing bias. Fed Governor Miran again dissented in favor of a cut. However, three participants (Reserve Bank Presidents Hammack, Kashkari, and Logan) dissented from including an easing bias in the statement, though they supported keeping policy unchanged. This ultimately lent a hawkish tilt to the meeting.

In his press conference, Chair Powell noted that, while the majority of the committee is in no rush to shift its policy stance, there is widening support for a neutral bias. Neutral or balanced forward guidance implies that the next move could be either a hike or a cut. Powell also placed more emphasis on realized inflation, noting that rate cuts are unlikely to be considered before the Fed sees progress on tariff-driven inflation as well as the “back side” of the energy shock.

Last, this was Powell’s final meeting as Fed chair. The Senate Banking Committee voted this week to advance Kevin Warsh’s confirmation, clearing the main hurdle to his nomination. Going against tradition, Powell confirmed he plans to stay on the board as a governor after his term as chair expires in mid-May. The Department of Justice investigation was likely a factor in his decision. While the department dropped its probe into Powell last week, it instructed the Federal Reserve’s inspector general to complete its investigation of the Fed’s building cost overruns. It remains unclear how long Powell will serve in his remaining term as governor, which ends January 2028.

Why it matters: The three dissents in favor of a neutral policy stance indicate a growing divide within the committee that could signal a hawkish turn in Fed policy. The longer inflation remains elevated, the more likely the Fed is to push out rate cuts. In the coming months, inflation is already set to drift further above 3% while economic activity is likely to stay supported, giving the Fed limited rationale to signal rate cuts. Nonetheless, the Fed tends to be resistant to policy shifts if there is a chance they may be reversed shortly after, such as if geopolitical uncertainty improves.

More importantly, however, the Fed is still far from considering rate hikes. The committee does not view labor market conditions as a source of inflation, as Powell noted in the press conference. Amid higher energy costs, the Fed is likely to remain more concerned about downside risks to employment rather than the upside. And although policy is no longer viewed as meaningfully restrictive, at 3.75%, the policy rate is unlikely to be viewed as very accommodative. The Fed’s best course of action remains keeping policy on hold, and a shift in policy stance, should it occur in the near term, would not change our view.

Strong Results Across Big Tech, but Not All Stocks Benefit

What is happening: This was a major week for earnings, including five of the Magnificent Seven reporting results and giving markets a lot to digest in a short period of time. After Wednesday’s close, Google, Meta, Amazon, and Microsoft all delivered results that came in ahead of expectations on both revenue and earnings, supported by continued strength in AI and cloud demand. Google stood out, posting 63% growth in its cloud business alongside a sharp increase in backlog, which points to potential market-share gains and helped drive a strong positive reaction in its stock.

Even with broadly strong results, market reactions were uneven. Microsoft reported solid cloud performance, but its shares moved lower as investors focused more on rising capital expenditures and increasing competitive pressure in its cloud businesses given Google’s acceleration. Meta’s stock price also lagged, weighed down by a softer revenue outlook and skepticism around its ability to translate AI investments into meaningful monetization. Amazon’s stock has been up since reporting but is lagging in the broader market. Across the group, most companies raised capital expenditure guidance, in part due to future demand, but also due to rising input costs, raising questions about future return on investment. The backdrop was further complicated by reports earlier in the week that OpenAI missed internal growth and revenue targets, which has since been denied by OpenAI’s CFO, adding another layer of scrutiny to the AI space.

Apple reported results after the close on Thursday and, similarly, beat consensus expectations driven by strong demand for its MacBook Neo and iPhone 17. Tim Cook, who is stepping down as CEO in September, did note that iPhone sales were held back by supply constraints on chips. Nevertheless, a strong quarter and positive outlook for the rest of the year, combined with a significant share repurchase plan, had the stock price reacting positively as of this writing.

Why it matters: The Magnificent Seven carry significant weight in major indexes, so their earnings results are critical not just for individual stocks but for the broader market’s ability to meet elevated expectations. More importantly, several of the earnings releases serve as one of the clearest real-time indicators of how the AI investment cycle is progressing, and for now, strong cloud growth and sustained demand suggest that revenue and profitability from AI investments are strong enough to keep the companies pushing forward and investors engaged.

At the same time, the steady increase in capital spending is raising the hurdle, as these companies will need to deliver stronger and consistent revenue growth to justify the scale of the investments. If capex is increasing due to higher input costs, this may mean the same level of future revenue for higher cash flow outlay today. This dynamic is showing up in market behavior, where investors are becoming more selective and less willing to reward all companies equally, though perceptions of winners and losers can still shift quickly.

While reactions at the individual stock level were mixed, the broader takeaway is that the AI buildout continues to move forward at full speed, supporting not only technology companies but also real economy sectors like industrials, infrastructure, and energy, as evidenced by very strong results and outlook from Caterpillar. The AI investment cycle is also showing up in economic growth, with U.S. Q1 GDP growth bolstered by capital expenditures with tech hardware and software leading the way.

Bessemer portfolios are overweight Caterpillar and the industrials sector. Portfolios are also overweight the semiconductor subsector, while remaining underweight the broader technology sector. Additionally, portfolios are overweight Amazon, Nvidia, Microsoft, Meta, and Google.