Market Musings - Q1: 2026 Commentary

Quarterly Investment Commentary  |  April 2026

"War is long periods of boredom punctuated by moments of sheer terror."

Anon.  ·  WWI era, c. 1914

The Quarter the Playbook Got Shredded

Markets, like war, are mostly boring … until they aren't. The first quarter of 2026 was supposed to be uneventful: earnings solid, rates drifting lower, AI humming along. Then, in four weeks, the Supreme Court struck down tariff authority under IEEPA, the U.S. and Israel conducted strikes killing Iran's Supreme Leader Khamenei, the Strait of Hormuz faced disruptions, oil surged, and the Fed held short-term interest rates steady while projecting limited 2026 rate cuts (one or fewer).

Nothing is obviously broken — the S&P 500 was down only 4.6% in the first quarter. But stocks came into the year expensive, so they haven't fallen enough to be cheap. Within equities, my preferences remain: value stocks over growth-oriented ones, smaller companies over large, and international markets over the US. I am also keeping some dry powder in a money market fund (~3.5% yield) to be ready to act when opportunities present themselves.

Q1 2026 — How Markets Did

Asset Class	Q1 2026 YTD
S&P 500 (US large caps)	▼ 4.6%
Nasdaq 100 (US tech)	▼ 7.0%
Russell 2000 (US small caps)	▲ +0.6%
Dow Jones Industrial Avg	▼ 3.6%
Developed Markets ex-US (EAFE)	▼ 1.1%
Europe (Stoxx 600)	▲ +0.5%
Emerging Markets (MSCI)	▼ 0.1%
Gold	▲ +8.1%
Silver	▲ +2.0%
US Bonds (Agg)	▼ 0.05%
Oil / Brent Crude	▲ +94%
Bitcoin	▼ 24%
US Dollar (DXY)	▲ +2.3%

Five Things That Defined Q1

Shock #1 · Tariffs —  The Court ruled 6–3 on Feb 20 that Trump's tariffs imposed via IEEPA were not authorized. The administration pivoted to the 1974 Trade Act, including a new ~10–15% global tariff framework. Trade policy uncertainty remains high.

Shock #2 · Iran War —  U.S.-Israeli airstrikes on Feb 28 killed Supreme Leader Khamenei. Iran responded with actions impacting the Strait of Hormuz — through which ~20% of global oil flows — contributing to sharp oil price moves.

Shock #3 · The Fed —  The Fed left short-term rates unchanged at 3.50–3.75% at its March 18 meeting and projected one rate cut in 2026. Seven of 19 members see no cut at all this year. The 30-year fixed national mortgage rate ended Q1 at approximately 6.9%.

Shock #4 · AI & Software —  Citrini Research's February 2026 note went viral, contributing to tech/software pressure. Questions about software pricing power are being actively debated by the market.

Shock #5 · Private Credit —  Customer withdrawal pressures across private lending funds. Several major asset managers limited or gated redemptions in some vehicles.

Looking Forward

VIX above 20 indicates fear

When asked for timing advice, I usually try to dodge the question — valuation is a poor tool for timing. The best indicators I've found are sentiment-based. Contrarian sentiment indicators such as the VIX and the AAII Bull/Bear survey are currently showing modest bearishness.

Harvest Tax Losses Early in the Year

Financial advisors look for capital losses to harvest in December each year — it should be an ongoing practice. In taxable accounts, you can sell underwater positions and redeploy the funds into similar stocks (but not the same one until after 30 days). This way, you maintain exposure to the market but have a valuable tax credit to use.

The Bottom Line

The recent modest pullback and rising fear are making me more interested in stocks.

The best investment advice I can offer for the long run is to not overreact to short-term news. The most powerful tools in investing are not individual stock tips, but the foundational principles of compounding, diversification, and dollar-cost averaging — each of which is available to you for free.

Disclaimer: These are my personal opinions and not intended as financial advice.