Capital Markets Commentary

INSIGHTS

Spring 2026 Market Commentary

The first quarter of 2026 marked a shift in market conditions following the strong finish to 2025. Investors began the year with cautious optimism, supported by resilient economic data and expectations that inflation would continue to ease. That outlook changed by late February, as geopolitical developments and rising energy prices introduced renewed uncertainty across financial markets.

Stocks: Down Overall, with Sharp Differences Beneath the Surface

U.S. stock markets ended the first quarter in negative territory, with most of the weakness occurring in March. Escalating conflict in the Middle East disrupted global energy supplies, pushing oil prices higher and weighing on investor sentiment.

While broad market indices declined, performance varied widely by sector. Energy stocks significantly outperformed, benefiting from higher commodity prices, while more growth-oriented areas of the market—particularly large technology companies—lagged. Some defensive sectors held up better, highlighting a rotation in market leadership rather than a uniform selloff.

Bonds: Yields Rose as Inflation Concerns Re-Emerged

Bond markets also faced challenges during the quarter. After starting the year on relatively stable footing, interest rates moved higher as investors reassessed inflation risks tied to rising energy costs. Higher yields led to price declines across many fixed-income sectors, including U.S. Treasuries and investment-grade bonds.

Despite near-term volatility, bonds continued to offer attractive income levels, though price movements reflected ongoing uncertainty around inflation and monetary policy.

Putting the Quarter in Context

Q1 2026 was a reminder that markets can react quickly to changes in global conditions, particularly when inflation and geopolitics intersect. While periods like this can be uncomfortable, they also highlight the importance of diversification and maintaining a long-term perspective through changing market environments. As always, it’s important to remember that uncertainty and volatility can lead to interesting opportunities as violent price swings may cause the market to misprice otherwise attractive assets

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INSIGHTS