By Haddon Libby
April capped one of the strongest months for U.S. equities in years. The S&P 500 rose by 10.4% in April and finished the month over 7,200, a record high.
Yet the broader picture doesn’t feel so jubilant. The divide between Wall Street and Main Street feels vast. Geopolitical tension tied to Iran and the Strait of Hormuz has kept energy markets on edge and prices moving higher. For Californians, the “energy tax” is much more than a national headline. On May 1, AAA showed the California statewide average at $6.06/gallon versus a national average of $4.39/gallon; the Riverside County average was $5.98/gallon.
How can the stock market be doing so well when most people are feeling the pinch of higher gas prices?
The April rally was led by a breakout in tech stocks that benefit from the start of the Fourth Industrial Revolution. The Fourth Industrial Revolution (4IA) refers to the current wave of change where digital, physical, and biological technologies converge – especially AI, robotics, sensors, cloud, and advanced manufacturing. In practice, it is about connecting machines, data, and decision-making so production and services become more automated, adaptive, and productive.
We are at the very beginning of 4IA. This is helping companies increase efficiency, which in turn is improving earnings. FactSet reports that the S&P 500’s earnings for the first quarter were 13.4% – the highest level FactSet has tracked since 2009. Revised estimates in May are signaling that corporate earnings could more than double from 13% for the rest of the year – the fastest growth rate ever. The signal investors are taking from all of that number is straightforward: in parts of the economy, productivity gains are arriving far faster than higher costs or eroding demand…at least for now.
Most of the stock market’s improvement revolves around the explosive growth of mega-cap tech. With demand for agentic AI outstripping near-term supply, the hyperscalers are pouring money into data centers, chips, and power that are projected to approach $700 billion of combined AI-related capital spending in 2026. And the private AI companies riding on top of that infrastructure are scaling at extraordinary speed: Anthropic has said its revenue run rate topped $30 billion at the end of April, up from about $9 billion at the end of 2025.
In other words, the market is rewarding a narrow set of companies that are turning massive capital expenditure into higher revenues and expanding profit margins.
Despite all of that, consumer spending still accounts for roughly two-thirds of the economy. With consumer sentiment generally sour due to higher prices and static wage growth, it doesn’t make sense that companies can be doing so well if most of their consumers are not doing well.
That is the unresolved question for the rest of 2026: can the productivity gains from AI arrive broadly and fast enough to offset the impact of lower consumer spending? In places like Riverside County and the Coachella Valley, where driving is not optional and commutes can be long, the impact is immediate.
If earnings stay strong, stocks can keep climbing even while most consumers struggle. But if higher fuel costs and slow wage gains finally force households to pull back, the gap between Wall Street and Main Street won’t just feel large but it will start to impact non-tech companies who cannot use AI to improve efficiency enough to offset a struggling consumer.
Should the war drag on, we may find that the consumer was the proverbial canary in the coal mine warning of imminent danger. For today and the month of April, investors are focused on the very positive side of the future with the growth of agentic AI. The next few months will reveal whether the rest of the economy can afford the Energy Tax long enough for the Fourth Industrial Revolution to pay it back.
Haddon Libby is the Founder and Chief Investment Officer of Winslow Drake Investment Management, a locally based Fiduciary Investment Advisor. For more information on our services, please visit www.WinslowDrake.com
