Quarterly Client Letter: 2026 Q1
April 2026
As the second quarter begins, the war in Iran, now entering its second month, remains the dominant economic story. It’s unclear how long the war will last, and markets have reacted accordingly.
Stocks have declined steadily since the war began on Feb. 28. The S&P 500 fell 4.63% during the first quarter, and the Nasdaq briefly fell into correction territory. Volatility has risen as the market attempts to keep up with the rapidly changing global situation.
Energy markets have been at the center of the disruption. The war continues to restrict the flow of oil from the Middle East, pushing prices higher. Brent Crude, the global benchmark for oil, climbed more than 44% between Feb. 27 and the end of the quarter. It remains unclear what continued conflict and damage in the region will mean for energy and the global economy, and investors worry about the downstream effects on inflation, consumer spending and economic growth.
Navigating a Landscape of Unknowns
What happens next depends on a series of interrelated variables that are, by definition, unknowable.
An immediate resolution to the war could lead to a steep drop in energy costs, but a protracted quagmire might push them to extreme highs. Whatever happens to energy costs will have a big impact on overall inflation. In turn, the outlook for inflation will affect Federal Reserve interest rate policy. On Feb. 27, the day before the war, Wall Street traders were expecting two to three interest rate cuts in 2026. Now, a rate hike appears increasingly plausible. Fed policy has big implications for the economy. Rate hikes raise the cost of borrowing, which can cool economic growth.
What Should Investors Do?
It can be tempting to try to interpret every headline and adjust your portfolio accordingly. But when the outcomes are unknowable, that approach is just guessing and gambling.
Even in more normal times, attempting to time the market and trade on evolving news is effectively impossible. The market is incredibly efficient, so stock prices already reflect any information you might have. And any changes you might make reactively may introduce more risk than they remove.
Instead, consider why you’re investing in the first place. The goal isn’t to outsmart the markets today or tomorrow or the next day, but to improve your ability to build the life you want.
That’s why you have a financial and investment plan designed to accommodate uncertainty. Diversification across asset classes, sectors, styles and geographies helps manage the unknown by providing downside protection and maintaining upside potential.
Remember that investing, at its core, is an exercise in navigating the unknown. The future is unpredictable, and sources of long-term returns are rarely obvious in advance. In fact, it’s the uncertainty about the future that fuels stocks’ long-term growth potential: Equities’ return premium compensates investors for the risk of the unknown.
Evolving headlines will continue to create uncertainty in the weeks and months ahead. Through it all, keeping your portfolio aligned to your long-term goals gives you the best chance to achieve them.
