Macro Moments Weekly: Spring is in the air (and in markets)

Seven weeks into the US-Israel-Iran war and little has changed, yet the markets appear nonplussed by the daily developments. A growing sense of confidence is evident in equity markets, which are now back to pre-war levels, and even in bond markets, where investors are trimming bets on interest-rate rises. Our Franklin Templeton Institute Market Strategist Lukasz Kalwak has highlighted that US indexes have delivered a number of strong buy signals over the last few weeks—see From the US Market Desk of April 10, 2026.

Why are markets recovering when there is no resolution to the conflict? First, as ever, the markets are a predictive mechanism and today may be anticipating a resolution. Based on history, markets are right more often than they are wrong. The market rally is also highlighting that the impact of the oil price rise is not as detrimental for the United States as it is for the rest of the world, and this is in line with the 2022 experience of the Russia-Ukraine war. We are seeing that in the contrast between the Purchasing Managers Index (PMI) data in the United States and Europe. US stocks have also kicked off their quarterly reporting season with strong results from the banking sector.

Meanwhile, when we look at Europe, we see gloom from both ends of the consumer sector. First, the airlines have made it clear that, with rising costs and falling demand, earnings expectations for 2026 are too high. Second, the luxury companies have reported sales and profits for the first quarter, that, one-by-one, have disappointed. Hermes noted a slowdown in demand in both the traditional centres and the Middle East, but also that the Americas ‘delivered an exceptional first quarter.’¹

This may well be an example of US exceptionalism at work. Between 1900 and 2025, the US equity market delivered real rates of return of 6.6% per year, compared with the rest of the world at 4.5%. Since 2011, the United States has delivered earnings per share growth of 280%, compared with Europe and China with 23% and Japan with 76%.²

Of course, there is value elsewhere as well as improving prospects, but the record of the US economy in both the long and short term remains exceptional. Since 2020, the annualized capital expenditure (capex) growth for the S&P 500 has been 14.2%. Compare that with Europe at 8.6% or China at 2.6%. Investment in artificial intelligence (AI) has been driving this growth, and US leadership in this industrial revolution is unrivalled. AI is an energy-consuming technology, and if we are in a period of energy shortages, new development will concentrate where energy supply is relatively cheap and secure. Once again, all pipelines lead to the United States, to the detriment of elsewhere.

Value and quality investments, on the other hand, are what the UK market has in abundance. Underscoring this, last week Intertek rejected a takeover bid by Swedish private equity company EQT, finding the offer too low.³ In 2025, 10.5% of the FTSE 250 Index market cap was bid for, which is well above the normal rate of 2%-4%. When you see activity at this level, the market is telling you something!

Parting shot

Last week, we saw a major profit warning from one of the backbone producers in the chocolate market, Barry Callebaut. Not only is demand melting away, but prices are also falling. Maybe, after the acceleration of GLP-1 injections for weight loss, demand for comfort food is down, or maybe we do not feel as depressed anymore! That’s what the equity markets are telling us. The old adage is, ‘Bears will always win the intellectual argument, but bulls will make the money.’