3 Things You Need to Know This Week | Q1 Earnings, April PMIs, Consumer Sentiment (Apr. 20, 2026)
Q1 2026 earnings season continues with defense contractors reporting, while analysts expect 13% S&P 500 earnings growth. April flash PMIs will gauge economic impacts from Iran conflict, and consumer sentiment hit record lows despite stocks reaching all-time highs.
Summary
The episode covers three key market developments for the week. First, Q1 2026 earnings season progresses with defense contractors reporting quarterly results, amid analyst expectations of 13% year-over-year S&P 500 earnings growth - which would mark the sixth consecutive quarter of double-digit growth. The hosts caution that defense stocks, while benefiting from Middle East conflict expectations, often rally before wars but lag once conflicts begin, citing the Ukraine invasion example. They emphasize that defense represents only a small portion of the 11% Industrial sector allocation in global markets. Second, April flash PMIs for major economies will provide insights into economic resilience following the Iran conflict that began in February. March PMI data showed continued growth above 50 in the US, UK, eurozone and Japan, with eurozone manufacturing reaching three-year highs at 51.4. The hosts suggest the global economy has shown underappreciated strength despite supply chain disruptions. Third, University of Michigan consumer sentiment hit record lows in April's preliminary reading, echoing the pessimism seen in June 2022 during recession and inflation fears. However, the hosts argue this disconnect between sentiment and fundamentals - evidenced by recent stock market all-time highs - actually creates bullish conditions when reality can surprise expectations to the upside.
Key Insights
- Defense stocks historically rally ahead of wars but often lag once conflicts actually start, as seen after Russia's Ukraine invasion in early 2022
- The entire Industrial sector makes up only about 11% of the global stock market, with defense firms representing just one slice within that allocation
- March PMI data showed eurozone manufacturing jumped to 51.4, beating expectations and marking the strongest growth in three years despite conflict-related supply chain disruptions
- Consumer sentiment surveys can create media buzz but aren't indicative of what's to come, as there's often a disconnect between how people feel and how stocks and the economy perform
- When sentiment is lowered, it creates more room for reality to surprise to the upside because markets move most on the gap between expectations and reality
Topics
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