We're never going to ring the bell exactly at "the" top -- but this move higher in the major stock indices, and especially in some semiconductor stocks, is a bit ridiculous. The S&P 500, Nasdaq, and Nasdaq 100 all gapped higher on Tuesday morning and all finished at all-time highs. There are all sorts of price gaps, including breakaway gaps, trading or common gaps, continuation or runaway gaps, and exhaustion gaps. A breakaway gap occurred on April 8; there were numerous continuation gaps in mid-April; and we now believe there has been an exhaustion gap. Of course, with a move like this, we won't know until after the fact.

Ventas Inc. is a real estate investment trust that invests primarily in real estate serving the healthcare sector and is a leader in private-pay senior housing in the U.S. The company acquires, develops, owns, and leases about 1,400 assets in the U.S., Canada, and the U.K. Ventas breaks its operations into three property segments: SHOP (senior housing operating portfolio); OM&R (medical office and research); and NNN, or Triple-Net Healthcare (hospitals, skilled-care nursing facilities, long-term acute care, in-patient rehabilitation). Recent focus has been on growing its SHOP portfolio. The company was founded in 1998 as a spin-off of Vencor, a healthcare services company. VTR also has an asset management business, Ventas Investment Management, with $5 billion under management. Revenues in 2025 topped $5.8 billion, with resident fees comprising about 73% of total revenues. At the beginning of 2026, VTR's portfolio included about 866 SHOP assets, 381 outpatient medical assets, and 28 research properties. Of the over 92,000 SHOP housing units, about 90% are in the U.S. VTR shares are a component of the S&P 500. The company's market cap is $40.3 billion.

Earnings Distract and Reassure The war in Iran has dominated headlines, politics, and the public discourse since its launch on the final day of February 2026. The attempted attack at the White House Correspondents Dinner, which dominated the weekend news cycle, is being pushed aside as energy prices continue to tick higher. While the bombing mainly has stopped in the Middle East, the lingering 'truce' may be worse for the economy than a fight that leads to a finish. First Iran, then the U.S., then Iran again declared the Strait of Hormuz closed to shipping. Knowing it is our mid-term election year, Iran seemingly wants to put sufficient pressure on the economy to prompt the U.S. to declare an end to all hostilities. The U.S. believes that by blockading Iran's ports it can eventually get the leadership to acquiesce on nuclear weapons or at least open the waterway. So the impasse drags on, leaving Asia and Europe starved for oil and prices on an unknown but upward trajectory. When the war in Ukraine bogged down, with the two sides gaining and losing territory marked in yards rather than kilometers, investors greeted that stalemate as largely positive. The stalemate in the Strait, on the other hand, worsens the global economy every day and winds the spring for potential inflation ever tighter. Calendar first-quarter 2026 earnings season may go unremarked in the world at large, but it is soothing war jitters and improving the mindset of U.S. investors. Along with favorably interpreted negotiation news, positive earnings are lifting stocks in the second quarter after a down first quarter and deeply negative March. We believe investors were looking for a distraction, but they got more than that: 1Q26 earnings are outstripping aggressive expectations. And as the market bounces back in a V-shaped recovery, the strong pace of EPS growth is keeping valuations reasonable. 1Q26 Earnings: Early Indicators As of the final full trading week of April, about 28% of companies within the S&P 500 had reported results. S&P 500 earnings from continuing operations for 1Q26 are up 15.5% on a blended basis from 1Q25 levels, based on the average of data reported by the major earnings aggregators (Bloomberg, FactSet, and Refinitiv). The blended basis captures both actual numbers for companies that have reported as well as estimates for companies yet to report. Given that consensus estimates reflect conservative guidance from CFOs, actual earnings when fully collected tend to run a few percentage points higher than the blended average at the beginning of EPS season. Earnings expectations were high heading into the EPS season, but actual results are topping expectations in multiple ways. The blended earnings growth rate is running about two percentage points ahead of expectations in the 13% range at the beginning of April. Of the companies reporting positive earnings growth for the quarter, 83% have reported results above consensus. That is meaningfully higher than the long-term range of 75%-80%. The biggest outlier in this earnings season may be the magnitude of the beat against expectations. The companies that have beaten EPS expectations are, on average, reporting earnings that are 10%-12% above consensus estimates. The historical beat against expectations is in the 5%-7% range. At the sector level, the best performance is coming from Information Technology. The blended EPS growth rate for the IT sector depends on the aggregator, but is very strong in a range from 44% (FactSet) to 48% (Refinitiv). The IT sector overall has below-average fixed costs and higher-than-average revenue per employee, leading to higher-than-average gross and operating margins. Below the operating line, IT companies have relatively lower debt burdens and more globally dispersed (lower) tax bases, meaning more operating income drops to the net income line. These are enduring advantages in any quarter. Other sectors with strong earnings growth in 1Q26 are benefiting from cyclical forces. Materials earnings are benefiting from weak dollar, which is favorable for commodity pricing, along with strong metals and chemicals demand driven by global data center buildout. Financial sector earnings are benefiting from higher capital markets activity and favorable net interest margins. Several of the industries with negative earnings growth are being impacted by a dominant company. Integrated oil & gas earnings are down double-digits within a single-digit Energy sector EPS decline, and Exxon Mobil is a chief contributor to the negative trend. Pharmaceuticals are the most negative segment within Healthcare, with Merck & Co. a heavy drag on the industry. According to our model, earnings have grown on a year-over-year basis since mid-2023, typically at a high-single-digit to low-double-digit pace. What has been keeping earnings growing so steadily through geopolitical and macro-economic turbulence? The two-prong answer is revenue growth and margin expansion. From a mid-single-digit rate in recent years, annual revenue growth has accelerated, and for the 1Q26 EPS season sales growth has been averaging just under 10%. A few points of that may be attributable to companies passing on tariff costs. If companies pile higher fuel costs on already strained customers, that could be a problem down the road. For now, higher revenues are supporting and enabling margin expansion. On that topic, net profit margin (on a continuing-operations basis) is running at least a point above the long-term average of 12.0%-12.5%. In addition to the higher-volume leverage that comes with above-average revenue growth, margin expansion partly reflects the best earnings growth coming from some of the highest-margined sectors, such as Information Technology. Still, margins are better across the board. All companies across all sectors have been through a lot in recent years: the COVID-19 pandemic and shift to blended home/company workspaces; the supply-chain crisis; inflation that peaked at 40-year highs; contested elections; tariffs; and war and energy shocks in Europe. Along the way, companies have learned how to run leaner, source raw materials optimally, and (wherever possible) turn fixed costs into variable costs. The lessons learned have enabled companies to expand margins in difficult times. That is not to say that companies can seamlessly absorb the current oil shock from the Iran war, which threatens to reach record levels. But investors can be confident that managements are planning mitigation strategies even as the situation unfolds. Up to one half of S&P 500 constituent companies, including most of the Magnificent 7 and multiple mega-caps across all sectors, will report calendar 1Q26 results in the two trading weeks beginning April 27 and May 4. We are not looking for a major change in the tendencies recorded so far: mid-teens EPS growth, higher-than-average percentage of companies beating estimates, and a much higher-than-average magnitude of the beat against expectations. In all, we look for a positive earnings season and one that perhaps provides reassurance amid the ongoing war narrative. Conclusion The S&P 500, which declined 4.6% in the first quarter, was up 9.2% for the second quarter to date as of the close of trading on 4/24/26. Balancing the 2Q surge with first-quarter decline, the S&P 500 was up 4.1% for the 2026 year as trading opened on 4/27/26 (and as the busiest two weeks of earnings season were getting underway). Sector performance is not lining up exactly with EPS performance for the year to date, but it rarely does. Still, in the current quarter, Information Technology has the best earnings growth and is indeed one of the best performers; and Energy is the worst performer and the worst sector for earnings. The U.S. stock market and stocks worldwide are being whipsawed by daily and sometimes hourly news on the willingness or unwillingness of the U.S. and Iran (and Israel) to come to the same table, much less craft a lasting peace. We'll leave that speculation to the politicians and pundits. What we do know and expect is that companies are proactively managing the oil cost crisis, weighing how much or how little of their higher energy costs to pass onto customers, and looking to find offsets to this margin negative. We also know that companies can draw on many positives in the operating environment and in their own operations to keep EPS moving forward briskly amid this newest set of challenges.

Ventas owns a diversified healthcare portfolio of almost 1,400 in-place properties spread across the senior housing, medical office, hospital, life science, and skilled nursing/post-acute care. The portfolio includes almost 100 properties in Canada and the United Kingdom as the company looks for additional investment opportunities in countries with mature healthcare systems that operate similarly to the United States. The firm also owns mortgages and other loans, contributing about 1% of net operating income.