Despite higher oil prices and low odds of rate cuts in 2026, the S&P 500 reached a new all-time high. [1]  Major equity indices were choppy in April as evolving Iran headlines and first-quarter earnings drove day-to-day swings. Even so, markets closed May 1 with the S&P 500 at a record 7,230. Energy remains the year-to-date leader, up more than 30%. In April, Technology and Consumer Discretionary led, largely on the strength of AI-related winners. That backdrop helped large-cap growth outperform value for the month (though still trailing year to date), the cap-weighted S&P 500 outperform its equal-weight counterpart, and semiconductors to continue outpacing software.

S&P 500 earnings growth remains the key driver, both realized and expected. [2] The S&P 500 blended earnings growth rate (actual results plus estimates for companies yet to report) is on track to reach 27.1%, driven by blockbuster mega-cap tech and AI-related results from Alphabet, Amazon, and Meta, which accounted for 71% of the increase in earnings growth. Notably:

• Four of the five largest contributors to year-over-year S&P 500 earnings growth in the first quarter are Mag 7 companies—Alphabet, NVIDIA, Amazon, and Meta. Blended earnings growth for the Mag 7 is now 61.0%, well above the 22.4% expected as of March 31.
• Both the share of companies beating estimates (84%) and the average magnitude of beats (20.7%) are well above 5- and 10-year averages. Strength has been supported by better-than-expected revenue growth of 11.1% and net profit margins of 14.7%.
• While the S&P 500 has rallied to new highs, rising earnings estimates have helped keep the next-twelve-month P/E multiple from moving to cycle highs. At roughly 21x, however, valuations still appear full.

AI innovation and investment show little sign of slowing. Hyperscaler[3] capital expenditures continue to ramp as demand for computing power outstrips supply. In parallel, remaining performance obligations across the four largest hyperscalers have grown to nearly $2 trillion, underscoring high expectations for sustained future demand. In April, Anthropic and OpenAI both released new models that support continued adoption, alongside new platform features as competition accelerates across consumer and enterprise use cases.

The attached PDF is a summary of Pathstone’s full report, which is available to clients upon request.