Financial Forum April 2026
Market Commentary – It’s Starting to Look a Lot Like 2022
History doesn’t repeat itself, but it often rhymes. So far, 2026 seems to be echoing 2022, when Russia’s invasion of Ukraine stoked a surge in global oil prices, reignited inflation, and caused the U.S. economy to flirt with recession. Back then, the results were painful, as both stocks and bonds lost money.
Today, a similar dynamic may be emerging through heightened tensions involving the U.S., Israel, and Iran. While not a perfect parallel, the potential economic effect is familiar—energy disruption leading to inflation, tighter financial conditions, and slower growth.
Fighting in and around the Persian Gulf has constrained oil shipments, particularly through the Strait of Hormuz, a critical artery for global petroleum supply. As a result, oil and gas prices have risen, placing upward pressure on inflation worldwide. This energy shock is increasing costs for businesses and consumers, slowing activity across major economies, and raising the risk of stagflation, where growth weakens while prices rise.
Markets have responded accordingly. Volatility has increased, business confidence has softened, and expectations for tighter monetary policy have resurfaced. If the conflict proves short-lived, the economic impact may remain contained. However, a prolonged disruption could sustain elevated energy prices and, more meaningfully, pressure global growth, especially in energy-importing regions.
What We’re Monitoring: Oil Prices. Equity markets are currently moving largely inverse to oil. Sustained prices above $100/barrel would likely act as a near-term headwind, while a move back toward $80 would be more supportive. The status of the Strait of Hormuz remains critical, and any escalation or disruption could continue to wreak volatility across markets.
Private Credit: A Growing Risk Beneath the Surface
Alongside geopolitical risk, private credit has emerged as a key area of concern. Private credit’s rapid growth, driven by firms such as Blackstone and Apollo Global Management, has introduced vulnerabilities that may not be fully appreciated. At the core is leverage. Many borrowers in private credit markets are already highly indebted and more sensitive to higher interest rates, increasing the risk of correlated defaults in a downturn. Unlike public markets, private credit lacks transparent pricing and frequent mark-to-market discipline, which can obscure deteriorating fundamentals and delay loss recognition.
Liquidity is another concern. Funds often hold long-duration, illiquid loans while offering periodic liquidity to investors, creating a mismatch that can become problematic in stressed environments. We’ve already seen early signs of strain, with some funds limiting redemptions. In addition, looser underwriting standards, particularly the prevalence of covenant-lite structures, reduce lender protections and potential recovery values. Finally, the growing interconnectedness between private credit, banks, and insurers raises the risk that stress in this segment could spill over into the broader financial system more quickly than expected.
What We’re Monitoring: Baa Credit Spreads. Baa credit spreads measure the additional yield investors demand for moderate credit risk. Spreads have risen to their highest level since mid-2025, signaling increasing concern. While not yet at levels that indicate severe stress, further widening would suggest rising default risk and tighter financial conditions.
AI: From Market Tailwind to Potential Headwind
Artificial intelligence has been the primary driver of market performance over the past several years. However, the scale of investment now underway introduces a different type of risk—return on investment (ROI).
Companies are committing tens to hundreds of billions of dollars toward AI infrastructure, including data centers and specialized chips, often without clear near-term monetization. If demand for AI services does not scale quickly enough, these investments could result in longer payback periods and pressure on margins. There is also the risk of rapid technological obsolescence, where current systems become outdated before they are fully utilized. Combined with high fixed costs and uncertain enterprise adoption, this raises the possibility of underutilized capacity and industry overbuilding.
In short, the risk is not that AI fails, but that returns fall short of the high expectations currently embedded in valuations. Recent developments have reinforced this uncertainty. Just this week, OpenAI halted development of its high-profile text-to-video app, highlighting the challenges of monetizing certain AI applications.
What We’re Monitoring: IGV (iShares Expanded Tech-Software Sector ETF). AI-related concerns have temporarily taken a backseat to geopolitical and credit risks. However, the underlying issues of uncertain ROI and potential industry disruption remain unresolved. Within public markets, IGV remains a useful barometer for software and AI-related sentiment. The IGV ETF has rebounded from late-February lows; however, if those lows are broken (just below $77/share), it could signal renewed weakness and increasing concern around AI-driven valuations.
Bottom Line: Markets are facing elevated risks on multiple fronts. While the Middle East conflict is currently the dominant driver and could resolve quickly, potentially triggering a sharp rebound, private credit stress and AI-related valuation risks remain important undercurrents. If one or more of these risks intensifies, a more defensive posture may be warranted. For now, maintaining a balanced approach, while closely monitoring these indicators, remains the most prudent course.
Quarterly thought…Optimism
“A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.”
— Winston Churchill
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Securities offered through Private Client Services, Member FINRA/SIPC. Advisory products and services offered through Pinnacle Wealth Management Group, Inc., a Registered Investment Advisor. Private Client Services and Pinnacle Wealth Management Group, Inc., are unaffiliated entities. The opinions contained herein are not necessarily that of Private Clients Services LLC.
*The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
* The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
