The Financial Quarterly | Quarter 1, 2026
Review and Outlook
Stocks ended a volatile first quarter down, posting their worst first-quarter performance since 2022.1
Is this a natural pullback from frothy market highs or a sign of more turbulence ahead?
Let’s take a look at the past quarter and talk through what might lie ahead.
Key Takeaways for Savvy Investors
As we enter the second quarter of 2026, markets continue to grapple with volatility, driven by geopolitical worries, energy concerns, and shifts in market confidence.
Even long-term investors who know how to stay patient with normal market swings might find this to be an unnerving time.
After multiple years of strong markets, 2026 is testing whether investors can maintain discipline when markets get volatile.
Here’s the truth: pullbacks are a normal part of investing. History shows that markets experience declines of 15% or more fairly regularly—yet still finish positive in most years.5
In 39 of the last 50 market drawdowns, markets achieved a new high within five months. While the past can’t predict the future, this recent decline (while uncomfortable) remains well within historical norms.
If markets “feel” different right now, you might be noticing that this decline has been slower and steadier than selloffs that rebound quickly. While we’ve seen some recovery rallies along the way, uncertainty remains high.2
But there are reasons for optimism as well. Behind the volatility, company fundamentals appear healthy.
Corporate earnings are still growing at double-digit rates, and about half of firms are expecting to report positive Q1 results.6 The labor market, while showing some signs of cooling, remains relatively stable.4 Markets may be adjusting to new information, but the underlying business environment hasn’t deteriorated dramatically.
Our outlook: stay patient and cautious.
Uncertainty can feel uncomfortable, but your overall strategy is designed to weather periods like these. Rather than reacting to headlines, we’re remaining committed to the overall strategy and watching the data carefully.
Questions about navigating this latest period of volatility? Let’s schedule some time to talk.
How Did Markets Perform Last Quarter?
S&P 500
%
The broader market fell as investors grappled with concerns about war, inflation, and the economy.2
NASDAQ
%
The tech-focused NASDAQ also fell as AI fervor cooled.2
DOW 30
%
Blue-chip stocks also dropped amid broader concerns about the effects of the Iran crisis.2
What factors may influence markets in the months to come?
Let’s take a look ahead at some of the factors that we’ll be watching in the weeks and months ahead.
Geopolitical Conflict
The Iran conflict is generating significant uncertainty for markets and the global economy. We don’t know how long the conflict will last, making it difficult to predict the impact on energy supplies and economic growth.1
Oil Prices
Oil prices have recently risen sharply, as the Iran conflict disrupted production and shipping.3 How long prices stay elevated will depend on how the Middle East situation evolves. If production and shipping resume, prices may fall again.
Inflation
Inflation remains above the Fed’s 2% target, and tariffs plus rising oil prices are adding new pressure to prices. If inflation remains sticky, it could make it difficult for the Federal Reserve to lower interest rates.4
Interest Rates
The Fed paused interest rate cuts in Q1 as inflation concerns mounted. While rate cuts remain on the table for 2026, elevated prices could push the Fed to keep rates where they are, or even consider a rate increase to curb inflation.4
“Market pullbacks are uncomfortable, but they’re a normal (if stressful) part of investing.”
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