Quarterly Update - April 2026

Q1 Market Review: Volatility Returns

The first quarter was a tale of two halves. We began the year with the S&P 500 higher, and the Dow Jones Industrial Average had just completed its 10th straight monthly gain in February leading to a sense of "steady as she goes" market. However, the narrative shifted mid-quarter as intensified conflict in the Middle East led to the effective closure of the Strait of Hormuz essentially stopping 20% of the world’s oil from passing through. Once hostilities began, the market stopped cooperating and the conflict sent Brent crude oil surging above $110 per barrel, a shock that reverberated through the global economy and forced a recalibration of inflation expectations.

Despite significant macro pressures, equity markets displayed remarkable fortitude throughout the first quarter. While the S&P 500 and the Dow fell 4.3% and 3.6% respectively, dragged down by a retreat in mega-cap growth names, investors found refuge in U.S. small caps, which managed a modest 0.89% gain. This internal rotation out of expensive tech was mirrored by a pronounced dispersion abroad; the MSCI All Country World Index dropped 3.2% under the weight of a surging dollar and rising energy costs, whereas Emerging Markets proved surprisingly resilient, finishing the quarter nearly flat with a marginal 0.17% decline.

The fixed income landscape remained largely stagnant as the market grappled with a persistent "higher for longer" narrative regarding interest rates. The Bloomberg U.S. Aggregate Bond Index was virtually unchanged, ending the period down a mere 0.05%. Although current yields offer attractive entry points for long-term investors, the looming threat of inflation re-accelerating-fueled by volatile energy prices-stifled any meaningful rally in long-term Treasuries. Consequently, the quarter’s best performance was found in short-duration instruments like Treasury bills, which provided a steady yield of nearly 0.9% for the three-month period.

The main story of the first quarter was how tension around the world caused energy prices to jump, which in turn pushed inflation back up. While we originally expected inflation to keep cooling toward the 2% mark, the March data showed a classic spike in oil and gas costs. This has forced the Federal Reserve to hit the brakes on their plan to lower interest rates. They are currently being very cautious, waiting to make sure these higher energy costs don't spill over into higher wages and general prices across the rest of the economy.

At the same time, we saw some encouraging news regarding global trade. Despite ongoing concerns about tariffs, the U.S. successfully secured new trade agreements with partners like Argentina and India. This suggests that while global trade is changing, it is finding new ways to grow rather than shrinking. Overall, the economy is proving to be quite resilient even with these shifting pieces.

Looking Ahead

As we enter the spring, our outlook remains cautiously optimistic despite the first quarter volatility. Market valuations in the U.S. are still elevated but corporate earnings forecasts for 2026 remain robust, with expectations for low double-digit growth. Over time it’s earnings that drive stock prices and future earnings projections look very strong. The damage done in the past several weeks, in terms of oil and shipping infrastructure destroyed and international relationships strained, will likely require many weeks to fully sort out, but the market is not currently pricing an elongated war leading to a recession.

In your portfolios, we have maintained a disciplined stance, and we remain vigilant as the global landscape shifts, focusing on high-quality investments while keeping a close eye on energy markets and the Fed’s next move. As always, our priority is to manage risk while positioning your capital to capture long-term growth.

Thank you for your continued trust and partnership. Please reach out to us anytime with questions, it’s our pleasure to serve each of you.

The content provided by Arena Wealth Management LLC is for informational purposes only and should not be construed as personalized investment advice. Investing involves risk, and there is no guarantee that any strategy or historical trend will result in future profits. Any opinions expressed are those of the authors and are subject to change at any time. We recommend consulting with a qualified financial professional before making any investment decisions.