Monthly S&P 500 forecast for April 2026
April 1st, 2026
Our monthly S&P 500 forecast for April is a 0.81 percent drop over the average of March 2026.
The model-based forecast takes into account the changes in oil prices and wages. However, a forecast model cannot possibly capture the full impact of uncertainty caused by tariff wars and geopolitical tensions, such as the war in Middle East.
Is the party over?
As February ended with the US and Israel’s attacks on Iran, we expected a sell-off once the stock markets opened. We expected a big surge in the price of oil and also in precious metals such as gold and silver. Our forecast of the S&P 500 index’s average performance in March was a -2% drop over the average of February. This forecast was based on fundamental economic factors rather than on speculation about the direction of the oil price. In reality, the index dropped 3.4% on average. The fall was even more severe when the end of March was compared with the end of February (-5.1%). From the March 2 peak, the index was down about 5.4%. Although the drop is not yet the correction territory (-10%), this is partly because the energy and defence stocks have so far provided a cushion against a more dramatic sell-off.
It remains to be seen if the Iran War will be a short one, as in the Gulf War of 1990. Even a short war then triggered a US recession. On the other hand, the longer-lasting Iraq War did not cause a recession in the US, although the inflation rate doubled over 5 years.
The US economy was already slowing down before the war. Although US consumer confidence indices and the labor market have not deteriorated enough to cause immediate concern, rising oil prices and inflation prospects increase uncertainty. Brent Crude and WTI oil prices ended March at $118.43 and $101.80/barrel, respectively. The party may be over as high oil prices are bound to put a damper on the investors’ bullish sentiment. Although the price of oil may fall below $100/barrel on the back of a “Trump Peace Plan” to end the war, even its short-term surge would have consequences for the global economy.
PMI deteriorates, consumer confidence improves
The Chicago Purchasing Managers’ Index (PMI) fell to 52.8 in March, after rising to 57.7 percent in February. The latest figure was below the market estimates of 55. This is the third time the index has been above the 50 mark since November 2023. The contraction in business activity has been a theme over the last two years. The latest data indicate that the market turnaround owing to new orders has started to lose steam.
The Conference Board’s consumer confidence index edged up by 0.8 points in March to 91.8 (1985=100), from 91.0 in February. The Present Situation Index—based on consumers’ assessment of current business and labor market conditions—increased by 4.6 points to 123.3. The Expectations Index—based on consumers’ short-term outlook for income, business, and labor market conditions—declined by 1.7 points to 70.9.
The survey period for preliminary results was March 1 to 24, 2026. Although consumers appeared less pessimistic in March, the war in the Middle East is likely to dampen any positive sentiment if the war with Iran drags on.
Inflation is tame for now, with downwardly revised Q4 GDP growth
The annual inflation rate in the US came in at 2.4% in February 2026 as expected, holding steady at its January level, which was the lowest figure since May 2025. Falling energy prices were the biggest contributor to cool inflation.
The personal consumption expenditures (PCE) index, a key barometer of inflation and consumer spending, rose at a 2.8% annual pace in January, compared with 3% in December. The market forecast was 2.9%.
Core PCE, which excludes the more volatile food and energy categories, grew 3.1% in January, up from 3% in December, in line with market forecasts. Both inflation indicators are above the Federal Reserve’s annual inflation target of 2%.
In February, the Producer Price Index data (PPI) was up 3.4% from a year ago, above the market expectations. This index is closely watched as a potential indicator for the prices consumers may see in the coming months as producers pass the impact of tariffs on to consumer prices. After the February 28 attacks on Iran, tariffs are not the only cause of concern for producers. As Brent crude price currently hovers well above the 100-dollar-a-barrel mark, it is clear that a prolonged war has grave consequences for the global economy and US inflation and growth in particular.
The US economic growth in 2024 Q4 was sharply revised down to 0.7% from the advance estimate of 1.4%. This was sharply slower than Q3 (4.4%) and well below the market forecasts (1.4%) (Source: Bureau of Economic Analysis (BEA)).
Although it was expected that the US government shutdown would put a damper on the Q4 growth, the substantial downward revision still took investors by surprise. Downward revisions to exports, consumer spending, government spending, and investment, as well as an upward revision to imports, contributed to the downward revision of the GDP.
Looking forward, things can progressively worsen as inflation starts climbing over the 3 percent mark with the rising energy prices. Stagflation may become a dominant theme, even if a hard landing for the US economy is avoided.
A rate cut in March is not expected
After the 25 bp rate cut in December, the Fed’s target range for interest rates is 3.50% to 3.75%. As expected, the Fed’s January 28 decision kept the U.S. short-term interest rate target in a range of 3.5% to 3.75%, the lowest since 2022.
As a result of the war in the Middle East, Brent crude has rallied sharply, climbing over $100 per barrel. Despite some output increase by the OPEC countries, the near-term price path of energy prices is currently uncertain. We have no doubt that the Fed officials will be hawkish in the March 17-18 meeting and keep the interest rates unchanged.
S&P 500 index approaches fair valuation
According to Factset Insights from March 27, the forward 12-month P/E ratio for the S&P 500 is 19.9. This P/E ratio is equal to the 5-year average (19.9) and slightly above the 10-year average (18.9). For 2026 Q1, FactSet reports that the blended (year-over-year) earnings growth rate for the S&P 500 is 13%. If 13% is the actual growth rate for the quarter, it will mark the 6th consecutive quarter of double-digit earnings growth.
The latest forward 12-month P/E ratio is well below the P/E values from the previous month (21.6). Our monthly S&P 500 forecast for April indicates a 0.81% drop over the average of March. We expect the forward P/E value to be fairly valued in April.
Our monthly S&P 500 forecast is a model-based fair-value estimate. Announcements of tariffs and cancellations cannot be captured in our model unless the impact appears in historical data. The possible impact of geopolitical tensions is fed into the model through keyword searches (Google clicks) and the advanced retail sales index. However, these variables perform better in normal times. Our quarterly S&P 500 forecast discusses these issues in more detail.
