VWG Wealth Management 2026 1st Quarter Review

By VWG Wealth Management on April 9, 2026

Executive Summary

• Broad equity indices were relatively calm for the first two months of the year.  Then on February 28^th the joint U.S.-Israeli strikes on the Islamic Republic of Iran triggered notable moves in bonds, commodities and currencies.  Stocks, particularly U.S. large caps, eventually came under pressure as the conflict dragged on.
• The S&P 500 index dropped 4.4% for the quarter.  International stocks continued their outperformance over U.S. stocks.  The MSCI All Country World Index (ACWI) excluding the U.S. increased 2.0%.  The MSCI Emerging Markets Index surprisingly gained 3.8%.
• Crude oil surged higher as shipments through the Strait of Hormuz ground to an almost complete stop.  The Brent Crude ICE continuous futures contract hit a high of $112/barrel.  Fears of supply-chain shocks and shortages of crude, natural gas, chemical feedstocks and fertilizers rippled through global markets. 
• Global interest rates spiked as extremely high energy prices reignited inflation concerns.  The 2-year U.S. Treasury note spiked 54 basis points during the quarter.  30-year U.S. mortgage rates pushed back into the mid-6% range.
•  The situation is extremely fluid and confusing.  At times like these and especially amidst “the fog of war,” it is helpful to pause and refrain from taking any abrupt actions.  Trying to separate facts from projections, obfuscations and hyperbole is a constructive exercise.
• Offsetting the very real macroeconomic concerns and fears facing investors are many positives. These include expectations for solid S&P 500 earnings, forthcoming OBBB stimulus and deregulation, the U.S. economy’s lower sensitivity to energy prices, the resilient U.S. consumer, improved equity valuations, and pervasive negative sentiment.
• Long-term investors should remain positive, holding diversified portfolios that include quality U.S. and international equities, and appropriate levels of liquid, short-term fixed income and cash equivalents.  As always, please keep your VWG advisor informed of any significant life or planning changes.  We will remain vigilant, and we will inform you if we modify our stance. 

Review of the Markets

Broad equity indices were relatively calm for the first two months of the year.  Small U.S. stocks (Russell 2000 index) and international stocks (MSCI ACWI ex-US index) continued to outperform large U.S. stocks, gaining 6.1% and 10.9% respectively.  The S&P 500 index nudged 0.5% higher in this period.

The February 28^th joint U.S.-Israeli strikes on the Islamic Republic of Iran triggered notable moves in bonds, commodities and currencies.  Brent crude oil (the North Sea oil benchmark that sets the global reference price) had its largest monthly increase in the last thirty years, jumping 42.7% (Brent Crude ICE continuous futures contract).  Shipments of crude oil, refined products, petrochemical feed stocks and fertilizers through the Strait of Hormuz ground to an almost complete standstill. 

Stocks eventually sagged as it gradually became apparent that the ‘excursion’ would not swiftly end.  Sentiment deteriorated, and the S&P 500 index (benchmark for large U.S. stocks) fell for five weeks in a row, its longest weekly losing streak in nearly four years.  For the quarter it dropped 4.4%.  Small U.S. stocks fared much better, edging 0.9% higher.  International stocks continued their relative strength over U.S. counterparts.  The MSCI ACWI ex-US index rose 2.0%.  Surprisingly, the MSCI Emerging Markets index increased 3.8%.

Global interest rates soared as extremely high energy prices, and the prospect of them remaining elevated for longer, reignited inflation concerns.  Independent analyst Wolf Richter warned that “energy spikes can sometimes trigger larger and broader inflationary pulses that can get out of hand,” and that “the market was now contemplating the previously unthinkable: a rate hike possibly late this year or next.¹”  The U.S. 2-year Treasury note touched 4.02% on March 27, a 54-basis point surge over the previous quarter’s close. 

For the quarter, the Bloomberg U.S. Aggregate Bond Index was flat on a total return basis.  30-year U.S. mortgage rates pushed higher into the mid-6% range, adding pressure to an already challenged housing market.  Economically sensitive high yield bonds slipped, with the Bloomberg High Yield Bond Index losing 0.4%.

Copper, a bellwether for economic health, sold off from the weight of concerns about higher inflation and slower industrial activity.  Gold plunged 9.6% off as soaring interest rates, inflation fears, and a rising U.S. dollar pushed it to its worst weekly (ending March 20) loss in 15 years.  Analyst Arthur Parish observed this to be a liquidity squeeze and “an unwinding of crowded momentum trades.²” For the quarter gold was still positive, with the NYMEX Gold continuous futures increased 7.8%.

The Middle East Conflict Eventually Weighs on Markets

Markets

Prior to U.S.-Israeli strikes on the Islamic Republic of Iran, the U.S. stock market appeared to shrug off a myriad of growing concerns including:

• A 180-degree turn in sentiment towards AI as concerns built over the eye-watering 2026 capital expenditure plans of hyperscalers.  Cross-supply and investment agreements, and increased debt-funding added to these fears as ‘AI fatigue’ spread to worries about the economics and long-term use cases of large-language models (LLMs).  Waves of indiscriminate selling of sub-sectors rippled throughout software, financial services, and cybersecurity.
• Growing fears over the explosion of assets and underwriting integrity in private-credit vehicles.  These were marked by large redemption requests at several high-profile funds that forced the imposition of liquidity gates.
• The January 30 Nomination of Kevin Warsh as the new Chairman of the Federal Reserve, which led some observers to question the future direction and tone of monetary policy.
• The February 20 Supreme Court ruling that the International Emergency Economic Powers Act (IEEPA) does not give the president unilateral authority to impose broad tariffs.  This reopened policy uncertainty as companies were unsure of the replacement tariff policies that would follow.  The timing and mechanics of refunds on roughly $160 billion already collected in struck-down tariffs came into question.  President Trump quickly signaled that he would pursue new tariffs, furthering trade-policy whiplash.

Underneath the surface massive volatility and rotation within sectors occurred.  The darlings of 2025 including artificial intelligence, the “Mag 7,” and financials and consumer discretionary stocks turned down.   Energy and staples bounced up hard from severely oversold and unloved conditions.  Silver traded vertically, touching an all-time high of $114/oz and then swiftly retreating.

Blackrock’s Rick Rieder stated that “the 30-day level of dispersion of S&P 500 constituents from the index was in the 98^th percentile over the past 30 years.³” This remarkable divergence is shown in the following chart by the Bespoke Investment Group.  On March 13, the S&P Index was down -2.7% for the year while over 20% of its components were up or down more than 20% year-to-date. 

Attempting to Ascertain “What We Know” Through the Fog of War

The current situation is extremely fluid and confusing.  Evercore’s Managing Director Julian Emanuel has called it “extremely tricky, one of the riskiest moments of the 21^st century.⁴”  How should investors respond?  VWG is reluctant to overstate anything with certainty, given how quickly conditions are shifting.

Particularly in the ‘fog of war’ where official statements, media reporting and emotions are volatile and conflicted, it is helpful to try to separate facts from projections, obfuscations and hyperbole.

Here’s what we do not know:

• We don’t know how long the conflict will last or how it will end (especially with four major parties – the U.S, Israel, Iran, Saudi Arabia – and many involved others, all with differing goals objectives).
• We likely don’t fully know or comprehend these goals and objectives.
• We have little knowledge of the long-term ramifications of this conflict and a post-engagement ‘worldview.’
• We don’t know how this potentially alters the relationship and positioning between the United States, China and Russia.
• We don’t know how long transport through the Strait of Hormuz will be constrained.  Experts do believe that it is only a matter of weeks until supply chains of oil, natural gas, chemicals and fertilizers begin to show critical shortages particularly in Asia ex-China.  We don’t know how long elevated prices, shortages and hoarding (inflationary) can persist until some demand is destroyed (stunting growth).
• Once the conflict ends or if transport through the Strait of Hormuz somewhat normalizes, we won’t know for months how much damage has been done to supply chains, and how much time and cost will be needed to fully restore them.
• We do not know how financial markets will respond to any of these developments.

Here is what we do know:

• Entering the 2^nd year of the U.S. election cycle and following three solid years of performance by the U.S. stock market, 2026 was expected to be much more challenging.  Reference our comments and the following chart from our 2025 4^th Quarter and Year End Review:

• Analysts’ consensus forecasts point to a 12% year-over-year S&P 500 earnings growth for this quarter, the 6^th consecutive quarter of double-digit EPS growth.  This is a marked increase over 2025 earnings.  Goldman Sachs’ Snider believes that “the current levels of the S&P 500 and Goldman’s proprietary sentiment indicator are improving the distribution of near-term outcomes for equity investors.⁵”
• One Big Beautiful Bill stimulus and deregulation still expected in what Strategas’ Dan Clifton has termed a “shock and awe economic policy.⁶”  This will be fueled by $150 billion in tax refunds and $200 billion in business tax cuts.
•  As we head towards this fall’s mid-term elections, further stimulus and proposed actions can be expected as incumbents pull out all stops to maintain their positions.
• The US hiring market is weakening and has been termed as a “low-hiring, low-firing” regime.  However, “the private employer aggregate wage bill reported in March’s employment report rose 5.5% year-over-year, translating to a 3% annual growth in worker’s real purchasing power.⁷”

• “Despite significant deterioration in inflation and consumer sentiment, weekly data on consumer spending, airline travel and hotel demand remains strong” per Apollo’s Chief Economist Torsten Slok.  He believes that “markets are overreacting to a period of volatility which will ultimately lead to 50 years of stability in oil markets, supply chains and geopolitics.⁸”
• Iranian strikes to Qatar’s Ras Laffan complex, the world’s largest liquified natural gas export facility and major helium production hub, have incurred major damage.  Numerous other Middle East crude oil, natural gas, and petrochemical production and refining facilities have been directly damaged or forced into precautionary shutdowns.  Analysts expect shortages and elevated prices for months or longer, particularly in Europe and Asia ex-China.
• The global economy is meaningfully more energy efficient today than it was ten years ago.  (Measured as primary energy consumption per unit of GDP (IEA global energy review 2025).  The U.S. is somewhat insulated.  “With an annualized energy trade surplus of nearly $100 billion in the past 12 months, the US will not be subject to as much pain as net energy importing countries should an energy price shock persist.⁹”
• In stark contrast to 2025’s waves of hype and momentum, “AI negativity” has now reached extremes.  Danny Creighton of Lux Capital now believes that “America is among the most negative countries in the world on AI, with recent polling suggesting that the AI backlash is deeply connected to consumer frustration with rising utility bills (despite the brutally cold weather which afflicted much of the central and eastern U.S. this January and February).¹⁰”  This pessimism appears to be at odds with the fundamentals.  Goldman Sachs estimates that “the largest AI-related stocks in the S&P 500 are expected to drive more than 60% of its first quarter earnings growth.¹¹”
• Until the last two weeks of March, equity indices were fairly calm.  They still appear to be pricing in a nearer-term resolution.  “The fact that crude has doubled from December lows, payrolls have sagged, and the market is only down 5% (4.4% at quarter’s close) from its highs” speaks to the resilience of the market and the economy.¹²”

Portfolio (and Behavioral) Positioning

Successful long-term investing isn’t just a constant journey in observing and learning about the outside world.  It is an endless quest to learn about human nature and understand oneself.  Difficult and confusing times magnify these challenges.

Joe Wiggins, Director of Research at UK wealth manager SJP, crystalizes the behavioral challenges of investing and ‘self-knowledge’ in his recent blog “Stick to What You Know.¹³”  His key points are:

• “Even those with considerable expertise cannot hope to forecast the unfolding consequences of geopolitical events.”
• “Predicting the” first, second and third-order financial market impact is even harder.
• “Short-term volatility in markets is unlikely to have a predictable impact on long-run outcomes. 
• “High real returns for holding equites over the long-term are compensation for bearing short-term volatility.””
• “Humans often hugely overweight high-profile and salient risks and are susceptible to making poor decisions when emotions are heightened.”
• “Diversification is the best protection against uncertainty.”

We cannot say it any better, other than adding Julian Emanual’s recent reminder that “betting on the ‘End of the World’ has been a losing proposition consistently since 1982, and we expect that to be the case once more.¹⁴”

 Diversification, patience, appropriate levels of liquidity, and quality short-term fixed income are essential, both for staying power during difficult periods, and to systematically deploy if stress significantly worsens.  Properly allocated long-term investors should remain positively positioned.

* All stated index returns are as of 3/31/2026 unless otherwise indicated.

* Index Data and Charts sourced from FactSet Research, Morningstar, Bloomberg, Strategas Research Partners, The Carlyle Group, Bespoke Investment Group.

1. Wolf Street Blog, Wolf Richter, March 21 2026. ↩︎
2. Arthur Parish, SP Angel metals and mining analyst, CNBC Squawk Box Europe, March 20 2026. ↩︎
3. “Respecting Gravity Part 2,” Rick Rieder, Chief Investment Officer of Global Fixed Income, Blackrock, March 5, 2026.  ↩︎
4. Julian Emanuel, Evercore, Director of Equity, Derivatives & Quantitative Strategy Team, Bloomberg Surveillance interview, March 17, 2026. ↩︎
5. “U.S. Weekly Kickstart,” Ben Snider, Goldman Sachs, March 27, 2026. ↩︎
6. “Strategas Policy Outlook,” Daniel Clifton, December 17, 2025. ↩︎
7. “The Risk is Time,” Jason Thomas, The Carlyle Compass, March 10, 2026. ↩︎
8. “Sentiment Destruction, Not Demand Destruction,” Daily Spark blog, Torsten Slok, Chief Economist, Apollo Global Management, March 27, 2026. ↩︎
9. “The Risk is Time,” Jason Thomas, The Carlyle Compass, March 10, 2026. ↩︎
10. “Riskgaming” newsletter, Danny Crichton, Lux Capital, March 12, 2026. ↩︎
11. “U.S. Weekly Kickstart,” Ben Snider, Goldman Sachs, March 27, 2026. ↩︎
12. Julian Emanuel, Bloomberg Surveillance interview, March 17, 2026. ↩︎
13. “Stick to What You Know,” Joe Wiggins, Behavioural Investment blog, March 4, 2026. ↩︎
14. Julian Emanuel, Bloomberg Surveillance interview, March 17, 2026. ↩︎