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April rally may extend into May as investors adapt to Iran war-driven volatility.
Strong earnings outlook and AI momentum continue to support tech and equities.
Defense, commodities, quality, and short-term bonds offer resilience now.
After an upbeat April, Wall Street has stepped into the so-called defamed month of May. It is called “defamed” because of the old adage, “sell in May and go away.” With April recouping Iran-war losses seen in March and bouncing back strongly, Wall Street will be striving hard to continue this ascent in May, but the operating environment is not entirely smooth this time either.
Note that, overall, the S&P 500 has jumped 9.3% over the past month (as of April 29, 2026), the Dow Jones has gained 5.4%, the Nasdaq Composite is up 14.3%, and the Russell 2000 has rallied about 9.7%.
The Iran war, the resultant rally in oil prices, tariff tensions, the chances of renewed inflation, and the resultant less-dovish Fed stance have been bothering the investment world. Global growth worries are also rife now.
Iran war, the resultant rally in oil prices, tariff tensions, chances of renewed inflation, and the resultant less-dovish Fed cues have been bothering the investment world. Global growth worries are rife now.
Moderate U.S. Economic Growth
The U.S. economy expanded at an annualized rate of 2.0% in Q1 2026, up from 0.5% in the previous quarter but below market expectations of 2.3%, according to a preliminary estimate, as quoted on tradingeconomics. Government spending grew 4.4%, recovering from a 5.6% contraction in Q4 of 2025, as activity resumed following the end of the government shutdown.
Rise in U.S. Inflation
The annual inflation rate in the United States rose to 3.3% in March 2026, marking the highest level since May 2024 and a sharp increase from 2.4% in both February and January, as quoted on tradingeconomics. On a monthly basis, consumer prices rose 0.9%, the largest increase since June 2022, following a 0.3% gain in February.
Massive Oil Rally
Oil prices remained elevated after Donald Trump signaled plans to maintain a prolonged naval blockade on Iran. Negotiations have stalled, with Tehran refusing to reopen the critical Strait of Hormuz until the blockade is lifted, disrupting regional oil flows and heightening global supply concerns. United States Oil Fund LP (USO - Free Report) has gained 18.4% over the past month (as of April 30, 2026).
If the U.S. economy begins to show back-to-back weak releases amid the Iran war that trigger economic concerns, the Fed may act in a dovish or less-hawkish manner. The April bounce in the stock market is likely to continue into May as investors have become accustomed to the impact of the Iran war.
Against this backdrop, we highlight a few ETFs that could shower gains on investors in an otherwise defamed May.
The Aerospace & Defense sector should remain strong and has the potential to stay steady in the coming days. Continued geopolitical tension, increased defense budgets, and reasonable valuations are tailwinds for the sector.
According to recent data from the Stockholm International Peace Research Institute (SIPRI), global military expenditure reached a record $2.89 trillion in 2025, marking a 2.9% rise. As a share of GDP, global military spending climbed to 2.5%, its highest level since 2009(read: Defense ETFs to Buy as Global Military Spending Rises 2.9%).
State Street Technology Select Sector SPDR ETF (XLK - Free Report)
The Tech sector is expected to log a substantial 27.7% earnings growth in Q1. The AI boom has continued to fuel the tech rally. Increased capex should further support the sector.
PIMCO Enhanced Short Maturity Active ETF (MINT - Free Report)
Volatility is the name of the game this year, thanks to the Iran war. Due to these uncertainties, money market-based ETFs may gain. Investors should note that ultra-short-term bond ETFs have lower interest rate risks.
Hence, cash and short-dated fixed income probably have played a greater role in adding stability to a portfolio. MINT has offered a flat return this year, but it yields 4.42% annually (read: Equal Asset Allocation Can Beat the Market? ETF Focus).
Invesco DB Commodity Index Tracking Fund (DBC - Free Report)
The commodity sector has been an area to watch lately, as supply disruptions through the Strait of Hormuz have driven prices of commodities higher. Due to geopolitical risk premiums, and safe-haven buying, commodities are rallying, especially in energy and metal markets.
Quality stocks are rich in value characteristics with healthy balance sheets, high return on capital, low volatility, elevated margins, and a track record of stable or rising sales and earnings growth. These stocks thus reduce volatility when compared to plain vanilla funds and hold up rather well during market swings.
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Considering "Sell in May?" 5 ETFs to Buy Instead
Key Takeaways
After an upbeat April, Wall Street has stepped into the so-called defamed month of May. It is called “defamed” because of the old adage, “sell in May and go away.” With April recouping Iran-war losses seen in March and bouncing back strongly, Wall Street will be striving hard to continue this ascent in May, but the operating environment is not entirely smooth this time either.
Note that, overall, the S&P 500 has jumped 9.3% over the past month (as of April 29, 2026), the Dow Jones has gained 5.4%, the Nasdaq Composite is up 14.3%, and the Russell 2000 has rallied about 9.7%.
The Iran war, the resultant rally in oil prices, tariff tensions, the chances of renewed inflation, and the resultant less-dovish Fed stance have been bothering the investment world. Global growth worries are also rife now.
Iran war, the resultant rally in oil prices, tariff tensions, chances of renewed inflation, and the resultant less-dovish Fed cues have been bothering the investment world. Global growth worries are rife now.
Moderate U.S. Economic Growth
The U.S. economy expanded at an annualized rate of 2.0% in Q1 2026, up from 0.5% in the previous quarter but below market expectations of 2.3%, according to a preliminary estimate, as quoted on tradingeconomics. Government spending grew 4.4%, recovering from a 5.6% contraction in Q4 of 2025, as activity resumed following the end of the government shutdown.
Rise in U.S. Inflation
The annual inflation rate in the United States rose to 3.3% in March 2026, marking the highest level since May 2024 and a sharp increase from 2.4% in both February and January, as quoted on tradingeconomics. On a monthly basis, consumer prices rose 0.9%, the largest increase since June 2022, following a 0.3% gain in February.
Massive Oil Rally
Oil prices remained elevated after Donald Trump signaled plans to maintain a prolonged naval blockade on Iran. Negotiations have stalled, with Tehran refusing to reopen the critical Strait of Hormuz until the blockade is lifted, disrupting regional oil flows and heightening global supply concerns. United States Oil Fund LP (USO - Free Report) has gained 18.4% over the past month (as of April 30, 2026).
Upbeat Earnings Picture
The Q1 earnings season is shaping up with solid momentum, as companies not only beat consensus estimates but also signal resilience in the economy despite elevated energy costs and geopolitical risks, per the Earnings Trends issued on April 22, 2026. Strength has been particularly notable on the revenue side, both in growth rates and beat percentages (read: Forget Geopolitics: Bet on Earnings Growth & Invest in These Sector ETFs).
Looking ahead, Q2 earnings are projected to grow 19.8% year over year on 9.2% higher revenues, up from 17.1% projected growth at the end of March (read: Forget Geopolitics: Bet on Earnings Growth & Invest in These Sector ETFs).
Why You Should Not Sell in May?
If the U.S. economy begins to show back-to-back weak releases amid the Iran war that trigger economic concerns, the Fed may act in a dovish or less-hawkish manner. The April bounce in the stock market is likely to continue into May as investors have become accustomed to the impact of the Iran war.
Against this backdrop, we highlight a few ETFs that could shower gains on investors in an otherwise defamed May.
ETFs in Focus
Invesco Aerospace & Defense ETF (PPA - Free Report)
The Aerospace & Defense sector should remain strong and has the potential to stay steady in the coming days. Continued geopolitical tension, increased defense budgets, and reasonable valuations are tailwinds for the sector.
According to recent data from the Stockholm International Peace Research Institute (SIPRI), global military expenditure reached a record $2.89 trillion in 2025, marking a 2.9% rise. As a share of GDP, global military spending climbed to 2.5%, its highest level since 2009(read: Defense ETFs to Buy as Global Military Spending Rises 2.9%).
State Street Technology Select Sector SPDR ETF (XLK - Free Report)
The Tech sector is expected to log a substantial 27.7% earnings growth in Q1. The AI boom has continued to fuel the tech rally. Increased capex should further support the sector.
PIMCO Enhanced Short Maturity Active ETF (MINT - Free Report)
Volatility is the name of the game this year, thanks to the Iran war. Due to these uncertainties, money market-based ETFs may gain. Investors should note that ultra-short-term bond ETFs have lower interest rate risks.
Hence, cash and short-dated fixed income probably have played a greater role in adding stability to a portfolio. MINT has offered a flat return this year, but it yields 4.42% annually (read: Equal Asset Allocation Can Beat the Market? ETF Focus).
Invesco DB Commodity Index Tracking Fund (DBC - Free Report)
The commodity sector has been an area to watch lately, as supply disruptions through the Strait of Hormuz have driven prices of commodities higher. Due to geopolitical risk premiums, and safe-haven buying, commodities are rallying, especially in energy and metal markets.
VanEck MSCI International Quality ETF (QUAL - Free Report)
Quality stocks are rich in value characteristics with healthy balance sheets, high return on capital, low volatility, elevated margins, and a track record of stable or rising sales and earnings growth. These stocks thus reduce volatility when compared to plain vanilla funds and hold up rather well during market swings.