On the April 20, 2026, episode of The Morning Filter podcast, David Sekera and Susan Dziubinski discuss last week’s stock market spike, market valuation, and the risks of market complacency. Here is an excerpt from the show.
What’s Driving the Stock Market Rally?
Susan Dziubinski: Despite the ongoing conflict, the stock market hit new highs last week. What’s your take on that, Dave? What’s driving stocks today?
David Sekera: Based on what’s going on with oil prices, I am a little surprised by just how far and how fast the market bounced here over the past week. But if you take a look at our valuations, I’m not necessarily surprised. If you remember, in 2026, we noted that the market was coming into the year trading at a discount. By category, growth was the most undervalued at that point in time. Specifically within the growth category, we called out technology and artificial intelligence stocks as being the most attractive. Yet for a whole host of reasons, we did say that we expected a lot more volatility this year. As such, we recommended investors have a barbell-shaped portfolio, essentially a portfolio that would be half high-quality value stocks, the other half being in growth stocks, specifically technology and AI.
Thus far, I’d say the barbell is actually working out pretty well this year. A month and a half ago, when the market started selling off, value stocks held up pretty well. In fact, they were in the green while the rest of the market was in the red. Energy, if you remember, we specifically called that out as being undervalued coming into the year. We talked about being overweight in energy stocks all of last year. Those skyrocketed. They were up about 35% at their peak. On the March 30 episode of The Morning Filter, we recommended to investors to start harvesting profits in energy and value stocks, and then use those proceeds to buy more growth stocks, specifically AI and technology, those that had been beaten up the most to the downside. The reason for that on March 30 was that the hedge had worked, and even though the stock market was still falling, we noted there were a lot of indications that the market did want to trade up. Once the conflict subsided and oil prices fell, those undervalued growth stocks and AI stocks are now starting to outperform the value stocks.
Is the Stock Market Undervalued?
Dziubinski: Where does that leave us from a valuation perspective today, Dave?
Sekera: Following the rally, it looks like the market is now only about 3% undervalued, so pretty close to that composite of our fair value estimates. Yet, even that undervaluation is very concentrated. If you look at some of the largest of the mega-cap stocks, those that we still think are undervalued—in this case, Nvidia NVDA, Microsoft MSFT, Broadcom AVGO, and Meta META—if I were to pull those out of our composite calculation, the market’s actually essentially fair value. The rest of the market, away from those four, pretty much trades on top of our fair value estimates. At this point, it’s really those growth stocks, specifically those four, that we see the best value for investors today.
Have Investors Become Complacent?
Dziubinski: Do you think there’s some investor complacency or maybe a little bit too much enthusiasm in the market today, especially given not just the ongoing conflict, but the risks that you’ve talked about before?
Sekera: Yeah, unfortunately, I do think that the market really became too complacent, too fast. Having said that, I still think we’re in the stage of that market rally where you want to let that growth part of your barbell continue to work, continue to keep running to the upside, as that is where we see the best value today. As you noted, I think we’re going to still see a lot of volatility over the course of 2026. I expect more ongoing volatility than what we had in the second half of 2025. Highlighting a couple of reasons here: High oil prices are going to boost inflation for at least the next couple of months, if not for maybe even the next couple of quarters. That, of course, is going to lower economic growth. At this point, we really don’t know the extent of those production and supply shutdowns that we’ve seen in Asia and Europe as well. That’s also going to have to work its way through our economy and the global economy.
With oil prices being high and high gas prices at the pump, we have yet to see exactly how consumers are going to react, how much they may pull in the reins here in the short term. We have trade and tariff negotiations; those were completely overshadowed by the conflict. I suspect those will probably start back up and hit the headlines here later this spring or maybe this summer. I think the Fed’s going to be on hold for the foreseeable future. Interest rates have kind of been in a trading range. We originally had expected interest rates to fall over the course of the year. They’re not necessarily falling like we had originally expected. With inflation staying higher, it might be a while before those start coming down. We’ve talked about the weakening fundamentals in the private credit market. That still has yet to play through in my mind. Taking a look at China, I think the economy there is probably weaker than expected. I think that their economy is accelerating at a decelerating rate. Lastly, you know me, I’m still keeping my eye on Japanese government bonds and Japanese yen, because if those continue to weaken at the pace that they have been weakening, you could see an unwind of the carry trade there.
Subscribe to The Morning Filter on Apple Podcasts, or wherever you get your podcasts, and keep up with the latest research from hosts Susan Dziubinski and David Sekera on Morningstar.com.
