Recent Markets: Q1 2026
The quarter was a tale of two halves. What began as a market driven by optimism around AI and anticipated interest rate cuts, was abruptly turned upside down on February 28 by the Iran war and the subsequent blockade of the Strait of Hormuz. Crude oil prices, which started the year near $58, surged to over $100 per barrel. This energy shock had an immediate impact on the financial markets, both domestic and global.
Stocks started the year strong with major U.S. averages reaching new historic highs in January. However, stocks then fell sharply in March, contributing to the S&P 500 suffering its worst quarter in nearly 4 years, declining 4.6%. Foreign stocks, on the other hand, continued their out performance, ending the quarter in positive territory ranging from 1% to as high as 8% in value-oriented segments.
Rising energy costs have reignited inflationary fears. The most recent PCE (Personal Consumption Expenditures) price index showed a 12-month increase of 2.8%, causing analysts at Goldman Sachs and JP Morgan to revise their 2026 inflation forecasts upwards to between 3.1% and 3.4%.
The hope for interest rate cuts in 2026 has largely evaporated, with markets now tilting toward the possibility of a rate hike to combat 'sticky' inflation. The 10-year Treasury yield, which had dipped below 4% pre-war, climbed back to 4.3% by the end of March. Similarly, the 2-year note closed the quarter at 3.8% after starting the year at 3.5%. As yields increased bond prices across all maturities have declined.
Despite the quarter’s volatility and uncertain future, U.S. corporations appear to remain resilient. Analysts are projecting a 6th consecutive quarter of double-digit earnings growth. The labor market has also remained stable, with the March employment numbers higher than economist expected and the unemployment rate edging down to 4.3%.
As we look ahead, we can’t help but acknowledge the loss of life and destruction occurring around the world. With all the uncertainty of our world, it is through faith in Jesus we trust in a loving almighty God who ultimately can bring peace and goodness. We remain focused on the long term and on maintaining a disciplined investment approach aligned with clients’ goals.
The information provided is educational and general in nature and not intended to be, nor should it be construed as investment, accounting, tax, or legal advice. It should not be construed as a solicitation, offer or recommendation to acquire or dispose of any investment or to engage in any transaction. Information herein was prepared by or obtained from sources that we believe to be reliable and is meant for general illustration purposes. Cooke Wealth Management makes no warranties, expressed or implied, as to accuracy, completeness, or results obtained from any information on this report. It is provided for your personal use and information purposes only.
Past performance does not guarantee future results. Nothing contained in this communication may be relied upon as a guarantee, promise, assurance, or representation as to the future. Market conditions can vary widely, and market and economic events having a positive impact on performance may not repeat. No diversification or asset allocation strategy can eliminate investment risk, losses, or protect against loss in declining markets. All investments involve risk including loss of principal. Investing in fixed income securities (bonds) involves interest rate risk, credit risk, and inflation risk. Investing in stocks involves volatility risk, market risk, business risk, and industry risk. International investing involves additional risks including, but not limited to, changes in currency exchange rates, differences in accounting and taxation policies, and political or economic instabilities which can increase or decrease returns. Investors should consider the objectives, risks, and charges and expenses of an investment carefully before investing.
Any index or benchmark included is for illustration purposes. Indexes are unmanaged baskets of securities that investors cannot directly invest in. They do not reflect the deduction of fees or expenses and assume the reinvestment of dividends and other income. The Dow Jones Industrial Average (DJIA) is Composed of 30 “Blue-Chip” US Stocks. THE DOW and DOW JONES INDUSTRIAL AVERAGE are registered trademarks of Dow Jones Trademark Holdings LLC (“Dow Jones”). The S&P 500 Index measures the performance of large-capitalization U.S. stocks. It is an unmanaged market value-weighted index of 500 stocks that are traded on the NYSE, AMEX, and NASDAQ. The weightings make each company’s influence on the index performance directly proportional to that company’s market value. S&P 500 is a registered trademark of Standard and Poors Corporation a division of McGraw-Hill Companies, Inc.