Schwab challenges a rally built on relief, not growth

The recent climb in the S&P 500 highlights how quickly sentiment can shift when immediate risks ease, but it also underscores how dependent the move remains on those same conditions staying favorable.

As shared by Joe Mazzola on Charles Schwab's WashingtonWise podcast, the current rally reflects stability returning rather than a clear expansion in underlying growth drivers. Whether this momentum evolves into something more durable will likely depend on broader participation across sectors.

Why Schwab is calling S&P 500's climb a relief rally, not a new uptrend

On the April 23 episode of Charles Schwab's WashingtonWise podcast, Joe Mazzola, head trading and derivatives strategist at Schwab, walked host Mike Townsend through what is actually driving the market here.

His framing is blunt. Based on Mike's analysis, the rally is being powered by speculation.

Mazzola told Townsend the difference matters because relief is temporary. Growth can absorb a bad headline and keep climbing. Relief reverses the moment the dodged risk comes back into view, which is why he is tracking three specific signals before calling this a sustainable uptrend.

The S&P 500 closed at a record 7,138 on April 22, ABC News reported, capping a sharp turnaround from the March lows that hit during the Iran oil shock. The rebound looks clean on a chart, but Mazzola's point is that the engine underneath it is not.

The signals Mazzola is watching to see if the S&P 500 rally holds

Mazzola laid out three concrete things he is tracking to judge whether April's bounce can turn into a durable uptrend. These are the specific markers he said investors should watch rather than trying to guess at sentiment.

1. Broad participation beyond the mega-cap names

Mazzola told Townsend that if only the largest technology names are carrying the index, the advance is narrow and fragile, and narrow leadership tends to be an early crack in rallies that eventually fail.

What he wants to see is financials, industrials, and small caps joining the move. So far, that breadth has been shaky, and the Russell 2000 has lagged the S&P 500 while a small group of AI-linked names has pulled ahead.

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Six S&P 500 stocks have already doubled year to date through April 22, and every one of them sits in the same trade - AI infrastructure, including storage, optical networking, and chip testing, Benzinga reported. Until the rest of the index catches up, he said he is treating the advance as one that still needs confirmation, not one that has already earned the broader market's trust.

Another way to read that narrow leadership is through the lens of market concentration. When a small cluster of companies drives most of the index's gains, it increases the market's sensitivity to setbacks in that group. Even modest pullbacks in a few dominant names can have an outsized effect on the overall index, masking weaker performance elsewhere.

2. Earnings that confirm the optimism

First-quarter results need to back up the price action, Mazzola said. Blended S&P 500 earnings growth currently stands at 13.2%, which would mark the sixth straight quarter of double-digit growth, FactSet reported.

Information technology is expected to drive roughly 87% of the index's earnings uplift, according to the same FactSet data, which means a few misses from the biggest AI names could wobble the whole thesis.

"If the rally continued to push higher, I'd be concerned that stocks, mostly within the tech space, are going to be set up for a 'sell on the news' earnings reaction," said Nathan Peterson, director of Derivatives Research and Strategy, Charles Schwab Center for Financial Research.

Analysts are calling for full-year 2026 earnings growth of 17.4% across the S&P 500, FactSet noted, a level that leaves little room for disappointment at current valuations.

The forward 12-month price-to-earnings ratio for the index is 20.9, above both the five-year average of 19.9 and the 10-year average of 18.9, FactSet said. Mazzola pointed to that valuation premium as another reason earnings have to come through. A market paying above-average multiples for average growth gives back quickly when the numbers miss.

3. Companies adapting to higher for longer

More corporate management teams are now building plans around the Federal Reserve's higher-for-longer posture on rates, rather than waiting for rescue cuts. If that adaptation shows up in forward guidance this earnings season, he said, it becomes a real foundation under the rally rather than a hope.

He told Townsend that the companies doing this well are the ones treating elevated rates as a fixed feature of their operating environment, not a temporary headwind. They are refinancing debt on realistic terms, holding pricing where they can, and running leaner on inventory. Those are the names he would trust to lead the next leg higher if one comes.

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What Mazzola says investors should take from this

Mazzola told Townsend that the right response to a relief rally is not to call a top or sit on the sidelines. It is to stay honest about what the market is pricing, and to remember that the bad news the rally dodged has not permanently disappeared.

The Iran ceasefire could fracture, inflation could stay persistent, and a large-cap AI miss could shake narrow leadership. Any one of those would test the relief thesis directly, he said, and that is why he is watching his three signals rather than the headline index level.

He also pointed to two items on his near-term radar that could move the tape. The first is the wave of mega-cap IPOs coming to market, which could pull liquidity from existing large-cap winners. The second is the new set of rules for day traders now filtering through the brokerage industry, which he said is worth watching for its effect on short-term flow.

If breadth improves, earnings broaden beyond tech, and management teams keep planning around higher rates, he said, the rally has a real chance to become an uptrend. Until then, the S&P 500 at 7,138 is a record built on conditions rather than confirmed growth.

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This story was originally published April 27, 2026 at 3:33 AM.