April was the month when stocks rebounded while oil prices reached a four-year high. The S&P 500 rose +10.4 percent and closed at a record level of 7,209. The Stockholm Stock Exchange recovered a large part of the March drop with OMXS30 up +4.5 percent. Brent passed $125 per barrel after the Strait of Hormuz remained closed and several attempts at a ceasefire failed.

We interpret the upturn as a sentiment-driven recovery rather than a solution to the underlying risks. The Federal Reserve's divided interest rate decision (with a vote of 8-4), Powell's last meeting and energy prices at record levels keep the risk of stagflation alive. The Riksbank is expected to keep the policy rate at 1.75 percent at its meeting on May 7. Core inflation is at 1.1 percent, the lowest level since July 2021.

Equity volatility has fallen sharply during the month, making portfolio hedging cheaper than in March and opening up asymmetric positions – an environment where active risk control pays off better than static allocation.