The first quarter of 2026 was a reminder that markets don’t move in straight lines and that headlines don’t always tell the full story.
Despite a steady drumbeat of geopolitical tension, shifting interest rates, and mixed economic data, markets delivered a nuanced (and somewhat surprising) set of results across asset classes.
A Mixed Quarter for Stocks
Global equity markets were slightly negative overall, but the story beneath the surface was more interesting.
- U.S. stocks declined for the quarter, returning -3.96%
- International developed markets held up better, down less than the U.S.
- Emerging markets performed the best, with only modest declines
Within the U.S., leadership shifted in a way we haven’t consistently seen in recent years:
- Value stocks outperformed growth
- Small-cap stocks outperformed large-cap stocks
This rotation is notable, especially after a long stretch where large growth companies dominated returns. It’s a good reminder that market leadership changes and often when investors least expect it.
Real Estate and Commodities Stood Out
Not all asset classes struggled this quarter.
- U.S. REITs posted positive returns, outperforming broader equity markets
- Commodities surged, with the Bloomberg Commodity Index up over 24% for the quarter
Energy-related commodities were the biggest drivers, fueled in part by geopolitical tensions and supply concerns. Oil prices moved back above $100 per barrel during the quarter, reinforcing how quickly global events can impact specific sectors.
Bonds Were Relatively Stable, But Rates Rose
Fixed income was relatively flat overall, but interest rates moved higher across much of the yield curve.
- The U.S. Aggregate Bond Index was slightly negative (-0.05%)
- Short-term bonds held up better than long-term bonds
- Yields increased across Treasuries, with the 10-year rising to around 4.30%
This environment reinforces the ongoing theme in fixed income: higher yields are improving long-term return expectations, even if short-term price movements remain uneven.
Headlines Were Loud But Markets Stayed Forward-Looking
If you followed the news this quarter, you saw plenty of reasons to feel uneasy:
- Escalating conflict in the Middle East
- Oil price spikes
- Shifting Fed policy expectations
- Mixed employment data
The timeline on page 5 of the report highlights just how constant and dramatic these headlines were throughout the quarter. Remember: markets don’t wait for certainty. They price in new information as it happens.
The Bigger Picture: Discipline Still Wins
As highlighted in the report’s geopolitical section, markets have historically continued to grow even through wars, crises, and economic disruptions. That doesn’t mean volatility goes away, but it does mean that reacting to headlines is rarely a successful long-term strategy.
What This Means for Investors
Q1 2026 reinforced a few key principles:
- Diversification matters: different asset classes behaved very differently this quarter
- Market leadership rotates: what worked last year may not lead this year
- Short-term noise is constant, but long-term returns are driven by staying invested
For long-term investors, the message is consistent: Stay disciplined. Stay diversified. And avoid making decisions based on what feels urgent in the moment.
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