Market Review

The first quarter saw a 9% drawdown in U.S. stocks driven by the U.S. conflict with Iran. This marks the 32nd drawdown of 5+% for U.S. stocks since March 2009 (which averages out to roughly two drawdowns per year over the past 17 years). As we like to remind clients, volatility like we’ve experienced recently is the “price of admission” for owning stocks and should be expected with regularity.

Bonds did their job in providing stability during times of turmoil while international stocks were down less than the U.S. and thus continued to make (small) progress in continuing to narrow the longer term performance gap relative to U.S. stocks.

We don’t know what the future will bring, but historically geopolitical crises like we’ve experienced recently have been great opportunities to increase exposure to stocks.

Index performance is provided as a benchmark. It is not illustrative of any particular investment. An investment cannot be made in an index. Past performance is not an indication of future results. Russell 3000 Index, MSCI World ex USA Index, MSCI EM Index, S&P Global REIT Index, US Aggregate Bond Index. Returns as of 3/31/2026.

Economic Review

[Keep in mind: the economic data usually lags a bit]

Real (inflation-adjusted) GDP growth slowed in Q4 (+1% annualized growth) with a slowdown in consumer spending and reduced government spending driven by the prolonged government shutdown.

 

Inflation declined further to +2.4% in February but seems likely to increase back above 3% in March and April driven by higher oil prices.

 

The Fed held the Federal Funds rate steady at 3.75% in the first quarter. While futures markets have fluctuated in recent months, current pricing suggests expectations of one more 0.25% reduction in 2026.

 

Mortgage rates remained above the 6% level (where they’ve been since 2022) and actually turned higher into quarter-end to close the quarter at 6.5%. 

 

Home prices have shown continued resilience despite elevated mortgage rates as the supply of homes available remains relatively low.

 

The unemployment rate declined slightly during the first quarter to 4.3% as the U.S. economy added 178,000 jobs in March.

 

Tax, Legal, & Legislative Updates

• Nothing new to report!