U.S. equity markets staged a rebound in April as investors welcomed the prospect of a ceasefire in Iran, even if it is among the most tenuous. All three major domestic indices gained and have returned to positive territory since the start of the year. Year-to-date, the S&P 500 has gained 5.31%, while the Dow Jones Industrial Average has appreciated 3.38%. The technology-heavy Nasdaq Composite index increased 7.10% and has been the winner so far since the start of the year. Precious metal gold’s choppy price action continued in April, falling 3.1%. Overall, we observed most of this month’s returns in the first three weeks. The last week of the month brought renewed concerns of a prolonged conflict with elevated energy prices into the summer months.
Real GDP grew at a 2.0% annualized rate in Q1 2026, rebounding from just 0.5% in Q4. This was mainly due to a recovery in federal spending after the late-2025 government shutdown. Business investment, especially nonresidential fixed investment and AI-driven equipment spending, led the gains. Software and intellectual property investment also posted an outsized gain, rising 13.0%, as enterprises moved aggressively to expand their AI capabilities through proprietary and licensed code. Meanwhile, the largest American technology companies have collectively signaled plans to deploy upward of $725 billion in capital expenditures in 2026, a commitment large enough to sustain elevated equipment and software investment well beyond the current quarter. In contrast, consumer spending, historically the most reliable source of domestic demand, decelerated to 1.6% growth as a 4.5% rise in the PCE price index eroded real purchasing power, pushing households toward essentials like healthcare and away from discretionary categories such as dining, travel, and recreation. Finally, trade was a significant drag, subtracting 1.3% from growth, with some of the resulting inventory buildup appearing to reflect companies pulling forward imports as a precautionary buffer against supply disruptions tied to geopolitical instability and volatile energy prices.
March’s personal income and outlays data showed a significant impact from the Middle East conflict, with gasoline prices surging 20.9% and driving up the headline PCE inflation rate to 3.5% year-over-year. This was a sharp increase from February’s 2.8%. Core PCE, which excludes food and energy, rose a more modest 0.29% for the month. After adjusting for inflation, real energy spending actually declined by 1.4%, illustrating how higher prices can boost headline spending figures while masking a real decline in consumption. Elevated tax refunds have provided a meaningful cushion, helping households maintain real outlays on essentials despite higher pump prices. The gap between spending and earnings remains a concern, as real disposable income fell 0.1% while real spending rose 0.2%, pushing the personal saving rate down to 3.6%. The Federal Reserve, facing inflation well above target and a consumer who has not needed more support, is expected to hold rates steady in the near term. The resilience of the tax-refund cushion and the path of energy prices amid geopolitical developments will be key variables to watch ahead.
Please see the following updates on existing positions held at the firm:
TransUnion (Ticker: TRU)— TransUnion delivered a powerful start to 2026, exceeding the high end of its Q1 guidance across all key metrics, posting 14% reported revenue growth and beating its revenue target by $41 million and adjusted EBITDA target by $18 million. U.S. Financial Services led the charge with 24% growth, while mortgage revenue surged 50%, demonstrating the company’s deep leverage to an improving housing finance environment. Management confidently maintained its full-year organic constant currency revenue growth outlook of 8–9%. Adjusted diluted EPS of $1.18 in Q1 anchors full-year guidance of $4.68–$4.75, and the company has already repurchased $25 million in shares year-to-date with plans to accelerate buybacks as leverage normalizes.
Farmers and Merchants Bancorp (Ticker: FMCB)— Farmers & Merchants Bancorp kicked off 2026 with a record quarter, reporting net income of $24.1 million and diluted EPS of $35.34, a 7.6% increase over Q1 2025, extending what is now eight consecutive years of record annual earnings. Net interest margin expanded to 4.25% (up from 4.20% a year ago), driven by a meaningful improvement in investment securities yield from 3.20% to 3.70%, while deposit costs held perfectly flat at 1.18%, a testament to the bank’s exceptional core deposit franchise with nearly 47% of deposits in non-interest-bearing checking accounts. Credit quality remains best-in-class, with just a single $730,000 non-accrual loan across a $3.6 billion loan portfolio. The balance sheet continued to strengthen, with total assets growing to $5.84 billion, capital ratios well above well-capitalized thresholds (total risk-based capital of 15.71%), and tangible book value per share surging 15% year-over-year to $928.99.
Blue Ridge Bankshares (Ticker: BRBS)— Blue Ridge Bankshares delivered its fourth consecutive profitable quarter in Q1 2026 as management continues to execute its strategic transformation back to a streamlined, high-quality community banking model. The consent order termination, achieved in Q4 2025, has already unlocked meaningful capital flexibility, enabling the Board to declare a special cash dividend of $0.60 per share on March 30, 2026, the second such special dividend in six months, demonstrating confidence in the balance sheet’s strength and a clear commitment to returning excess capital to shareholders. BRBS is increasingly presenting itself as an attractive, de-risked acquisition target amid accelerating M&A activity in the community banking space.
We are pleased with our gains this month and with the continuation of our relative outperformance against the popular indices so far this year. As earnings season continues through May, we will actively adjust accounts as required. If you have any questions, please feel free to reach out to us!
Best Regards,
Stash J. Graham