Equity markets experienced a volatile start to 2026, with periods of sharp drawdowns driven by geopolitical tensions and policy uncertainty. Global stocks ended the quarter down 3.2% as U.S. large cap growth stocks weighed on returns. Value stocks and small caps generated positive returns during this period. Despite the pullback in stock prices, corporate fundamentals remained solid with corporate earnings expected to grow double-digits this year.
Bond returns were essentially flat during the quarter with price declines from higher rates offsetting interest income.
The monetary policy outlook shifted during the quarter as inflation concerns increased during the quarter. Expectations are now for the Federal Reserve to keep rates steady for 2026.
Economic Update
The U.S. economy entered 2026 with solid momentum following a resilient 2025. Economic growth is expected to come in around 2%–2.5% for the year, representing a stable, albeit moderating, expansion. While not indicative of a booming economy, this level of growth remains consistent with a non-recessionary environment.
However, the path of growth remains uneven. Trade policy and geopolitical events have created uncertainty around the outlook for both businesses and consumers. Also, with lower growth in the number of workers, the productivity piece of inflation will be a key driver of growth. Increased spending on R&D and intellectual property could support productivity growth in the coming years.
The conflict in the Middle East and the accompanying disruption in the global energy supply chain caused oil prices to spike in March, up 80% from the start of the year. This is expected to boost overall inflation in the near term. It is worth noting that gasoline and other energy goods represent only 2% of U.S. personal consumption and that the U.S. is now a net exporter of oil. This lessens the potential impact of higher oil prices on the U.S. economy and it is unlikely that the U.S. will be pushed into a recession. However, the higher oil prices have an outsized impact on lower and middle-income households.
The spike in oil prices has added uncertainty to the outlook for monetary policy. Investors entered the year expecting the Federal Reserve to cut rates twice during 2026. With the potential for higher inflation and unemployment remaining low, expectations for monetary policy shifted during the quarter, and investors expect the Federal Funds rate to remain unchanged for the rest of 2026. These changing expectations pushed yields up during the quarter, particularly in the 1- to 5-year section of the yield curve.
Chart Source: Russell Economic and Market Review First Quarter 2026
Equity Recap
Stock markets had a volatile first quarter with tariff headlines, AI-related concerns in the software sector and conflict in the Middle East weighing on performance. Global stocks fell 3.2% during this period. Non-U.S. outperformed early in the quarter while U.S. stocks rebounded in March. Weakness in US growth stocks was only partially offset by positive returns in US value and small cap stocks. International stocks were down slightly.
In the U.S., stocks in the technology, financials and consumer discretionary drove negative returns during the first quarter. The ten largest holdings in the S&P 500 all trailed the index during the quarter and the stocks known as the “Magnificent 7” returned (-11%) while the rest of the stocks in the S&P 500 were down only (-1%).
Corporate earnings expectations remain a key support for equities, with analysts projecting solid growth for 2026. This has helped offset concerns related to higher interest rates and geopolitical risks. Valuations for U.S. equities remain elevated relative to historical averages, although they are no longer at extremes.
Chart Source: Dimensional Fund Advisors
International equities rallied in January and February before giving back gains in March, ending the quarter down slightly. International stocks still trade at a wide discount to U.S. stocks and could benefit from U.S. dollar weakness and investor repositioning.
Fixed Income Recap
Chart Source: Eaton Vance, The Beat, April 2026
Rising rates put pressure on bond prices during the first three months of the year. With yields increasing over the last five years, bonds now generate reasonable income that was able to offset most of the price declines during the quarter.
Credit spreads (the extra yield investors receive for investing in corporate bonds) widened during the quarter. Spreads had been historically tight and concerns in the private credit market along with the conflict in the Middle East drove them higher.
Tighter spreads in corporate credit have highlighted opportunities in other areas, such as securitized fixed income, which offer attractive yields for high quality securities.
Chart Source: Dimensional Fund Advisors
With the increase in yields during the quarter, the broad investment grade bond market is yielding 4.57%. The starting yield has been a strong indicator of returns over the next five years, pointing to a solid outlook for fixed income investors.
Takeaways & Outlook
With the ups and downs in the stock market along with daily headlines around geopolitical events, many investors were concerned with how their portfolio fared over the start of the year. In talking with clients, it was often better than their expectations. In a diversified, balanced portfolio, bonds provided stability and international stocks and small cap stocks offset some of the weakness in U.S. large caps.
It is important to note that when we design portfolios for clients, we expect that events like this will happen. We don’t know when or exactly what it will look like, but we do know there will be drawdowns and volatility in markets. This impacts how we invest across both stock and bond portfolios. It also plays a major part in the financial planning we do.
Throughout these events, we remain focused on the consistent implementation of the long-term plan we have put in place for clients. This includes rebalancing and adjusting portfolios as opportunities present themselves. If you are not a client and have not stress-tested your portfolio or do not have a well-designed plan to navigate uncertain times, perhaps now is the time to do so. We stand ready and available to assist you.
Dan Haines, CFP®, CFA
Dan joined Voisard Asset Management Group in 2024 as a Senior Wealth Manager. He is responsible for the development of comprehensive wealth management plans, the management of investment portfolios and the development of firm-wide investment strategies.
Prior to Voisard Asset Management Group, Dan co-founded and led an investment advisory firm. Prior to that, Dan worked for two multi-billion-dollar advisory firms where he focused on building tailored portfolios for clients. Dan is a CFA® charterholder and a CERTIFIED FINANCIAL PLANNER™ practitioner. He holds a BA from Calvin College and a MBA from the University of Notre Dame.
Dan serves on the boards of Kalamazoo Loaves & Fishes and Alongside Inc. He grew up in Grand Rapids and now lives in the Kalamazoo area. When he isn’t working with clients, Dan spends most of his time with his wife and daughters. He also enjoys golfing and spending time outdoors.
Q1 2026 Quarterly Commentary
Contributed by: Dan Haines, CFP®, CFA
Market Performance Overview
Economic Update
The U.S. economy entered 2026 with solid momentum following a resilient 2025. Economic growth is expected to come in around 2%–2.5% for the year, representing a stable, albeit moderating, expansion. While not indicative of a booming economy, this level of growth remains consistent with a non-recessionary environment.
However, the path of growth remains uneven. Trade policy and geopolitical events have created uncertainty around the outlook for both businesses and consumers. Also, with lower growth in the number of workers, the productivity piece of inflation will be a key driver of growth. Increased spending on R&D and intellectual property could support productivity growth in the coming years.
The conflict in the Middle East and the accompanying disruption in the global energy supply chain caused oil prices to spike in March, up 80% from the start of the year. This is expected to boost overall inflation in the near term. It is worth noting that gasoline and other energy goods represent only 2% of U.S. personal consumption and that the U.S. is now a net exporter of oil. This lessens the potential impact of higher oil prices on the U.S. economy and it is unlikely that the U.S. will be pushed into a recession. However, the higher oil prices have an outsized impact on lower and middle-income households.
The spike in oil prices has added uncertainty to the outlook for monetary policy. Investors entered the year expecting the Federal Reserve to cut rates twice during 2026. With the potential for higher inflation and unemployment remaining low, expectations for monetary policy shifted during the quarter, and investors expect the Federal Funds rate to remain unchanged for the rest of 2026. These changing expectations pushed yields up during the quarter, particularly in the 1- to 5-year section of the yield curve.
Equity Recap
In the U.S., stocks in the technology, financials and consumer discretionary drove negative returns during the first quarter. The ten largest holdings in the S&P 500 all trailed the index during the quarter and the stocks known as the “Magnificent 7” returned (-11%) while the rest of the stocks in the S&P 500 were down only (-1%).
Corporate earnings expectations remain a key support for equities, with analysts projecting solid growth for 2026. This has helped offset concerns related to higher interest rates and geopolitical risks. Valuations for U.S. equities remain elevated relative to historical averages, although they are no longer at extremes.
International equities rallied in January and February before giving back gains in March, ending the quarter down slightly. International stocks still trade at a wide discount to U.S. stocks and could benefit from U.S. dollar weakness and investor repositioning.
Fixed Income Recap
Rising rates put pressure on bond prices during the first three months of the year. With yields increasing over the last five years, bonds now generate reasonable income that was able to offset most of the price declines during the quarter.
Credit spreads (the extra yield investors receive for investing in corporate bonds) widened during the quarter. Spreads had been historically tight and concerns in the private credit market along with the conflict in the Middle East drove them higher.
Tighter spreads in corporate credit have highlighted opportunities in other areas, such as securitized fixed income, which offer attractive yields for high quality securities.
With the increase in yields during the quarter, the broad investment grade bond market is yielding 4.57%. The starting yield has been a strong indicator of returns over the next five years, pointing to a solid outlook for fixed income investors.
Takeaways & Outlook
With the ups and downs in the stock market along with daily headlines around geopolitical events, many investors were concerned with how their portfolio fared over the start of the year. In talking with clients, it was often better than their expectations. In a diversified, balanced portfolio, bonds provided stability and international stocks and small cap stocks offset some of the weakness in U.S. large caps.
It is important to note that when we design portfolios for clients, we expect that events like this will happen. We don’t know when or exactly what it will look like, but we do know there will be drawdowns and volatility in markets. This impacts how we invest across both stock and bond portfolios. It also plays a major part in the financial planning we do.
Throughout these events, we remain focused on the consistent implementation of the long-term plan we have put in place for clients. This includes rebalancing and adjusting portfolios as opportunities present themselves. If you are not a client and have not stress-tested your portfolio or do not have a well-designed plan to navigate uncertain times, perhaps now is the time to do so. We stand ready and available to assist you.
Dan Haines, CFP®, CFA
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