Quarterly Insights

April 1, 2026

Mike Ovshak, CFP® | President, Owner, Senior Financial Advisor
Nick Ovshak, CFP®, CRPC® | Financial Advisor, Manager

Click the image below to view a video of Nick’s Market Commentary: 

Q1 2026 Market Update: Geopolitics, Oil and Market Pullbacks

The first quarter of 2026 is a reminder of why preparation matters in financial planning. After strong gains in 2025, markets faced geopolitical shocks, rising oil prices, and renewed economic uncertainty. The conflict in Iran, which began in late February, became the dominant market story — pushing oil prices sharply higher and triggering the first meaningful pullback of the year. By late March, ceasefire headlines emerged, though the situation continues to evolve.

Stepping back, markets have still performed well over the past twelve months, with energy and defensive sectors supporting portfolios through the turbulence. Looking ahead, a leadership change at the Federal Reserve and the midterm elections will likely drive new market conversations later in the year.

Key Market Data

S&P 500: -4.3% total return in Q1 | Nasdaq: -7.0% | Dow Jones: -3.2%
Bloomberg U.S. Aggregate Bond Index: flat for the quarter; 10-year Treasury yield ended at 4.3%
International stocks: MSCI EAFE -1.1%, MSCI EM -0.1% (USD terms)
Inflation: Core CPI +2.5% year-over-year in February

Pullbacks Are Normal — Don't Overreact

The chart above shows the worst to best quarterly returns since 1988. It's worth noting that Q1 2025 also saw a 4.3% S&P 500 pullback — that time driven by tariffs, this time by Middle East conflict. The market effect on investor sentiment was similar in both cases. And just as last year's volatility gave way to strong gains and dozens of record highs, history shows that rebounds often happen when investors least expect them.

Since 1980, the S&P 500 has averaged an intra-year drawdown of roughly 15%, yet markets finish positive in more than two-thirds of years. Last year saw six pullbacks of 5% or more — and still ended with an 18% total return. Short-term swings driven by headlines are simply part of the market cycle. Portfolios built around long-term goals are designed for exactly these moments.

Geopolitics and Oil: The Main Uncertainty

The escalating Middle East conflict drove the quarter's most significant market move. Disruptions to the Strait of Hormuz — which carries roughly 20% of global oil — led to production cuts across the region. Brent crude surged to $118/barrel, the highest since the war in Ukraine, while the national average for gasoline reached $4 at the end of March.

Higher fuel costs raise consumer prices broadly, but economists generally view supply-side shocks as temporary. Oil prices typically stabilize once the geopolitical situation settles — as happened in 2022 when Russia invaded Ukraine, gas hit $5 before falling within months. History also shows that geopolitical events, while unsettling, have rarely derailed markets over the long run. Investors who made dramatic portfolio changes in response to past events often did so at the wrong moment.

The Economy Is Cooling, But Remains Healthy

Beyond energy, the broader economy has slowed but remains fundamentally sound. February payrolls fell by 92,000, and the unemployment rate edged up to 4.4%. For the first time in years, job seekers outnumber job openings — a reversal from 2022, when there were two openings for every unemployed person.

Context matters here: fewer people are entering the workforce due to lower immigration and an aging population, so both supply and demand in the labor market are cooling together. Consumer spending, which drives more than two-thirds of GDP, has remained stronger than many expected — a key reason the economy has continued to grow despite persistent recession predictions.

Sector Divergence: Energy Leads, Tech Lags

While the S&P 500 is down for the quarter, six of eleven sectors are actually positive year-to-date, with nearly 50 percentage points separating the best and worst performers. Energy leads with nearly 40% gains, boosted by higher oil prices. Consumer Staples, Utilities, Materials, and Industrials have also held up well — traditional "defensive" sectors with steadier cash flows.

Information Technology has declined roughly 9%, with many Magnificent 7 stocks underperforming after years of dominance. This is a useful reminder that sector leadership rotates. Energy led in 2021–2022 when tech struggled, then the reverse played out over the next three years. Predicting which sector will lead in any given year is extremely difficult, which is exactly why diversification matters.

Tariffs: Policy Direction Continues

In late January, the Supreme Court ruled 6-3 that broad tariffs imposed under IEEPA were unlawful. The administration responded by applying import duties under alternative legal authority and opening new trade investigations. The legal mechanism has changed, but the policy direction has not — tariffs will continue to influence consumer prices, business costs, and investor sentiment. Last year demonstrated that markets adapt to policy shifts over time, reinforcing the importance of staying invested rather than reacting to each headline.

The Bottom Line

Q1 2026 brought genuine challenges — geopolitical shocks, energy price spikes, and economic uncertainty. Yet well-balanced portfolios have done what they were designed to do. The principles of sound investing — diversification, a long-term focus, and resisting the urge to overreact — matter most precisely when uncertainty is highest. Stay focused on your long-term goals as we move into the months ahead.

As always, keep us posted on any changes in your plan or if you are planning to make substantial withdrawals from the accounts we help with, so we can review appropriate options.

If you have any questions about your portfolio or anything in this update, please don't hesitate to reach out.

This letter is a general communication being provided for informational purposes only. It is educational in nature and not designed to be a recommendation for any specific investment product, strategy, plan feature or other purpose. Any examples used are generic, hypothetical and for illustration purposes only. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, legal, tax and other professional advisors that take into account all of the particular facts and circumstances of an investor's own situation. 

Certain sections of this commentary contain forward-looking statements based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets.

All indices are unmanaged and investors cannot invest directly into an index. The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip stocks. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. The Bloomberg Aggregate Bond Index is an unmanaged market value-weighted index representing securities that are SEC-registered, taxable, and dollar-denominated. It covers the U.S. investment-grade fixed-rate bond market, with index components for a combination of the Bloomberg government and corporate securities, mortgage-backed pass-through securities, and asset-backed securities. The Bloomberg U.S. Corporate High Yield Index covers the USD-denominated, non-investment-grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below. 

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