FADING SUPPORT: WALL STREET ENTERS ITS 'FINAL INNINGS'?

I am Elise, your companion in today's newsletter. Currently, investors are navigating a challenging and contradictory environment, where market sentiment is constantly torn by macroeconomic factors. Amidst geopolitical tensions in the Middle East, particularly the temporary ceasefires, and the risk of maritime disruptions from Iran, which continue to cast a shadow over energy markets, a distinct risk premium has been priced into oil. Although the U.S. stock market maintains impressive resilience, thanks to a streak of positive corporate earnings growth and strong capital inflows from households, cracks have begun to appear. The pressure from rising energy costs is acting as an invisible tax, eroding consumer purchasing power and threatening the profitability of many economically sensitive cyclical sectors. Let's review the detailed analyses from leading experts and top banks to better understand the current landscape. Part 1. U.S. STOCK PERFORMANCE AND GEOPOLITICAL RISK SENTIMENT According to the financial news outlet Newsquack AsiaPac Market Open, the U.S. stock market on April 23, 2026, recorded slight gains as investor risk sentiment improved thanks to the extension of the ceasefire between the U.S. and Iran. Major indices all advanced, with the S&P 505 percent, the Nasdaq up 1.73 percent, and the Dow Jones up 0.69 percent. Although the risk of immediate military escalation has eased, the continuous disruptions in the strait of Hormuz caused by Iran's actions have kept oil prices high, creating a clear geopolitical risk premium in the energy market. Part 2. Despite strong financial market growth, Goldman Sachs hedge fund manager has outlined Wall Street investors' contrasting views on market health amidst the energy crisis. The Bears warn that the market is overly complacent about energy flow disruptions. They point out that the strong speculative buying force that previously fueled the market is showing signs of fading, while the current upward momentum is extremely narrow and concentrated in only a few specific companies. For instance, Micron Technology accounts for more than half of the market's variants. Furthermore, U.S. GDP growth is expected to slow significantly in the second half of the year as tax stimulus packages fade. Conversely, the Bulls argue that the current energy price shock is merely temporary and will not alter the future value of the stock market. They are bolstered by the fact that U.S. households continue to invest heavily in equities, the U.S. economy remains resilient as it's forward, and corporations are experiencing their sixth consecutive quarter of double-digit earnings growth. Part 3. Corporate earnings and consumer spending power are under pressure from inflation and energy costs. Also, according to information from Tyler Durden, published on ZeroHedge, rising energy prices are acting like a tax weighing down the economy, causing certain sectors to start suffering. Specifically, regarding consumer pressure, financial company Capital One, CEF reported that its provision for credit losses surged by 72% compared to the same period last year, reaching $4.07 billion. And CEO Rich Fairbank frankly pointed out that the Middle East conflict is a cloud hovering over consumers. Data also showed that customers spent 25% more on fuel in March than in the previous month. For businesses, the aviation sector has been hit hard, as United Airlines lowered its second-quarter and full-year business forecasts due to rising fuel prices, while Lufthansa had to cancel about 20,000 summer flights to save costs. A bright spot lies in the software sector, as Adobe reassured the market by authorizing a massive $25 billion stock repurchase program lasting until April 2030. Part 4. The market's technical support is entering its final stages. Nothing goes up forever, especially when market growth is built on leverage. Rich Priverotsky, head of Goldman Sachs' Delta One desk, assessed that the market is in the final innings of the phase supported by systematic flows. Although Commodity Trading Advisor, CTA, trading models theoretically still have room to buy stocks, in reality, the easiest part of the rally may already be behind us. With poor market breadth, liquidity concentrated in only a few names, investors are tending to hunt for risk in laggard junk stocks to seek returns. Part 5. The shift of capital from public to private markets? In an article titled published on Bloomberg Opinion, looking at the macro-structural picture of Wall Street, there is a clear trend of shifting economic growth ownership to higher-fee investment vehicles. Wealth management advisors at major banks like Morgan Stanley, UBS and Bank of America have generated billions of dollars in fees by routing retail investors' capital flows into private market funds managed by Blackstone, Apollo, KKR, instead of letting them choose ultra-cheap index funds. This has led to a situation where financial products in the private market are being over-allocated to retail investors. In summary, Wall Street is entering a sensitive, pivotal phase where the easiest part of the recovery may have been left behind. Although the main bull trend has not been broken, the current tactical risk-restoreward ratio is considered no longer highly attractive. Investors seem overly complacent by underpricing deeper downside tails amid signs of exhaustion in technical support foundations. Advice from experts, particularly from Goldman Sachs, emphasizes that maintaining and even increasing hedges is a wise move at this time. Alongside this, from a long-term structural perspective, the massive shift of capital flows into private investment funds with more expensive costs is also posing a major challenge for retail investors regarding actual profitability in the future. The market in the upcoming period will demand extreme caution and a stricter selection strategy rather than just blindly buying into the general trend.