This Week in Review | April Recap, UAE OPEC Announcement, US & Eurozone Q1 GDP

Transcript

Hello and welcome to This Week in Review. This weekly segment is designed to highlight a few important developments you may have missed this week, what they may mean for markets, and most importantly, the potential impact for investors. To stay up to date with our latest market insights, subscribe to our YouTube channel or visit FisherInvestments.com.

Now let's review what happened this week.

First, an April recap.

Global stocks saw a drop of around 9% in Q1 following the onset of the war in Iran. But April brought a strong rebound and new record highs. Some may say this recovery is unusual, a sign that investors are ignoring risk. But as we highlighted in a recent MarketMinder article, markets have behaved exactly as they typically do when regional conflicts occur. Initially, markets price in worst case scenarios, which we saw with stocks declining while oil prices spiked in February and March. But by April, markets began to understand and appreciate the limitations of this conflict to impact the global economy.

As is always the case, every day the disruption continues, global businesses find new ways to innovate around the problem. We've seen this before, most recently during Covid. The longer the conflict goes on, the less relevant the Strait of Hormuz should become. As more workarounds get put into place and producers outside the Persian Gulf ramp up production, incentivized by higher prices. Ultimately, these shifts will make the world less reliant on the Strait of Hormuz and more resilient in the face of future conflicts. We can see markets pricing in exactly that. April was a roller coaster of announcements, with hopes of a resolution giving way to escalations back and forth. And yet, despite this turbulence, stocks rose sharply throughout the month to new record highs. That's because markets look past the details of a conflict to the broader implications for the global economy.

And while many would assume the opposite, expectations for future corporate earnings in the US, Europe and globally have all risen since the war began. We think this highlights the ability of global businesses to find ways to adapt and continue to grow in the face of adversity.

Next, the UAE announced its departure from OPEC.

On Tuesday, the United Arab Emirates, or UAE, announced plans to withdraw from the Organization of Petroleum Exporting Countries, or OPEC. We believe the UAE's announcement likely means little for the oil market in the immediate term, considering the Strait of Hormuz closure restrains much of the group's production. But in the longer term, the decision taken by OPEC's fourth largest producer does highlight how OPEC's status has fallen. The bloc used to hold great sway over the oil market, and it is still an important player.

But we believe many investors overestimate the cartel's ability to control oil prices. Likely because they recall OPEC's influence during the 1970s and 80s, particularly the impact of the Arab oil embargo in 1973 through 1974, which led to rationing of gasoline in Western countries. Many investors assume OPEC still has the same ability to disrupt economies, but oil market dynamics have changed significantly in recent years. The UAE's departure will lower OPEC's share of global output to 26% from 30%. But even before the UAE's announcement, OPEC's share of production had fallen dramatically in recent years as output in the US, Canada, Brazil, Guyana and elsewhere has grown.

And today, it is the US that has become the main swing producer in global oil markets, now accounting for around 22% of global crude output. Importantly, economies have also become less oil intensive over time, limiting the ability of oil shocks to harm economic growth the way they have in the past. To us, this mismatch between investor fears and market realities, represents a classic false fear that bull markets routinely overcome as they climb what we call the wall of worry.

Next, U.S. and eurozone GDP.

On Thursday, the US and eurozone released their initial estimates for first quarter 2026 GDP. US GDP accelerated from 0.5% annualized growth in Q4 2025 to 2% annualized growth in the first quarter of 2026. Meanwhile, the eurozone grew 0.1% quarter over quarter. While these figures fell short of expectations, weaker GDP numbers don't necessarily point to an impending recession. Even if GDP weakens further from here, slowdowns, or even brief contractions, are common during periods of broader economic growth.

In the US, headlines focused on business spending on artificial intelligence, but business investment went beyond AI, and despite fears of inflation and high gas prices, consumer spending continued to contribute nicely to growth. In Europe, pockets of weakness and areas of strength netted out to overall modest growth, but we believe Europe's still steep yield curve and positive lending growth are underappreciated forward looking economic fundamentals. When combined with today's dour sentiment, this can help set the stage for better than appreciated reality to positively surprise ahead.

Some have dismissed these reports as old news, noting they predate recent energy market turbulence tied to the Middle East conflict. But that's the nature of much economic data. It's inherently backward looking. While it offers valuable context, GDP has never been a reliable indicator of where stock prices are headed. Stocks, on the other hand, are forward looking. Whatever happened in Q1 has already been priced in, with investors focusing on what's happening next. It's also worth noting, while growth may not be gangbusters, stocks can do just fine in that environment. Currently, sentiment is gloomy, but we believe this is bullish as it lowers the bar reality needs to clear to deliver positive surprise.

That's it for this week. Thanks for tuning in to This Week in Review. If you're looking for more insights, then don't miss our other series, Three Things You Need to Know This Week, released every Monday.

You can also visit Fisherinvestments.com anytime for our latest thoughts on markets. Thanks again for joining us, and don't forget to hit like and subscribe.