April Market Commentary

If I had been here before /
I would probably know what to do

Crosby, Stills, Nash & Young
Deja Vu

Two American icons, Mark Twain and Yogi Berra, have sayings that are attributed to them though actual records of their statements are hard to come by.  “History may not repeat but it rhymes” is linked to Twain while “it’s déjà vu all over again” is known as a Yogi-ism. Over time, these two sayings have become a pithy way to make light of what may be a less than favorable recurring event. The Twain saying is often cited as a warning to not underestimate the likelihood of something, typically bad, happening again in the same or comparable manner.  Investment experts like to use it when they are explaining unfortunate outcomes that “were out of their control”.  Similarly, the Berra saying references something, be it mundane or exceptional, happening again, typically surprising the speaker.

For investors looking back at market performance in March and Q1 2026, both sayings are appropriate. A similar occurrence happened one year earlier. Starting in mid-February 2025, market sentiment shifted towards nervousness after a positive start to the year.  Concerns about overspending on AI related investment, uncertainty about the new Trump administration’s tariff plans, and continued geopolitical tensions around the globe weighed on U.S. equity markets through the rest of Q1 2025. Non-U.S. stocks and bond markets were able to avoid most of the sell-off but eventually the negativity bled into those markets.  Roll forward to March 2026 and the end of Q1. Tariffs and their impact on global trade remain a concern but are far outweighed by the initiation of the Iranian Conflict and its impact on energy prices, global trade and supply chains, and overall economic growth. Instead of trying to figure out how tariffs will impact inflation, investors around the globe are dealing with oil prices spiking from $73/barrel to over $100/barrel in less than a month. The far-reaching impacts of higher oil prices coupled with supply constraints caused a swift repricing of stocks and economic growth across regions most affected by the Conflict.  While the U.S. is largely energy independent, the energy sector is global in nature, and the effects of high energy prices reach beyond the gas pump into most parts of the economy.

Another big contributor to the reversal in equity market performance in Q1 2025 and Q1 2026 was the performance of many big tech stocks whose fortunes have been tied to the AI theme. Though some stocks, particularly those seen as the picks and shovels of the AI revolution, continued to perform well, many of the big names rolled over during the second half of this quarter. Fears about overspending for a massive buildout of capacity caused investors to question whether the earnings needed to justify the elevated valuations could be achieved. Fortunately, many old economy sectors such as Energy, Materials, Utilities, and Industrials are less impacted by AI and provided a safe haven for U.S. investors during the March storms. Unlike in 2025, non-U.S. stocks did not provide much diversification as their economies are more impacted initially by rising oil prices and supply disruptions than the U.S.

U.S. equity markets were down -3% to -6% for the month, with the S&P 500 and Russell 2000 each down -5%. Just as in 2025, the negative March returns took a big bite out of what had been a small but positive start to the year. Overseas markets declined sharply in March with MSCI EAFE down 10%, causing the Q1 return to come in at -1%. Similarly, emerging market stocks fell -13% for the month and were flat for the quarter, though there was wide dispersion among the various countries’ returns. U.S. bond markets were hurt by rising interest rates during much of the month and quarter. The Bloomberg Agg was down -1.8% for March and was flat for the quarter.

Here are observations on what occurred across the investment markets in March:

Broad Market Performance¹

• U.S. equity market returns were down in March across the board as stock prices declined on concerns about the economy, rising oil prices, and geopolitical risks.

• Value stocks beat growth stocks across all market caps during Q1. Market breadth was favorable with the S&P 500 Equal Weighted beating the Cap Weighted index by 5% for the quarter.

International and Global Equities³

• The Iranian Conflict caused non-U.S. developed stocks to decline more than 10% in March as investors feared rising energy prices and supply chain disruptions would harm regional economies in Europe and Asia.

• Emerging market stocks sold off more than -13% after performing well in January and February. China held up better in March while S. Korean stocks were hurt by the sell-off in AI related technology names.

Fixed Income Markets⁴

• U.S. bond market returns fell during March as interest rates rose on inflation fears caused by rising oil prices. For the quarter, returns were flat to modestly negative.

Specialty Markets⁵

• Oil prices spiked during March as the Iranian Conflict disrupted production in the region. Precious metals prices fell in March but were up for the quarter.

Sectors⁶

• All sectors except Energy (+10%) were down during March.  Old economy sectors were positive for the quarter while Technology and Consumer Discretionary fell -9%.

The feeling of “it’s déjà vu all over again” is hard to escape as Q1 2026 ended due to the parallels that caused the sell-off in Q1 2025. Soon after that quarter ended, the tariff announcement pushed markets to the lows of the year only to see them rebound sharply over the next six months as the administration partially retreated and the economy proved its resilience once again. Looking ahead to the rest of 2026, it is difficult to expect that rebound to repeat itself as the global conflicts continue to expose geopolitical and economic risks. Additionally, U.S. economic growth has slowed, the labor market is softening, and AI enthusiasm is more tempered.  That said, there are large segments of the U.S. economy that remain strong and better insulated from some of these risks. This market environment calls for increased diversification across portfolios and more balanced expectations for return and risk.  It is right to “feel like I’ve been here before”. 

^1-6 All data referenced in the table and comments supplied by Morningstar as of 03-31-2026

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