Markets Update: Contextualizing Q1 Volatility
At the end of last year, we outlined our 2026 outlook around two key factors we believed could influence market direction.
The first was the anticipated leadership transition at the Federal Reserve and how that could shape interest rates, inflation, and overall monetary policy. The second was the November midterm elections, where a potential shift in congressional leadership could create challenges in passing new legislation and increase reliance on executive actions.
With these possibilities in mind, we made proactive adjustments to portfolios earlier this year. The goal was not to predict exact outcomes, but to position thoughtfully ahead of potential change.
A comparison of our initial market expectations versus the realities we are currently managing:
As the year has progressed, markets have experienced some volatility. While we expected the possibility of a correction, the specific catalyst tied to geopolitical tensions in the Strait of Hormuz was not something that could have been predicted. Events like these are a reminder that markets can react quickly to global developments.
At this stage, we view current conditions as a typical market correction rather than a prolonged downturn. This perspective is based on the fact that many underlying economic fundamentals have remained relatively stable. That said, markets are dynamic, and it is important to avoid drawing firm conclusions too early.
Our approach remains steady and measured. We continue to monitor developments closely while avoiding reactive decisions based on short-term headlines.
What We Are Watching
If geopolitical tensions persist, there are a few areas that could be impacted over time:
Energy prices may remain elevated
Inflation could experience renewed pressure
Consumer spending may begin to slow
Economic growth could moderate in the coming months
These are not certainties, but they are important factors to keep in view as the year unfolds.
How Portfolios Are Positioned
Earlier adjustments made in February were designed to create resilience across a range of potential scenarios. Areas such as:
Energy
Commodities
Technology
International exposure
have contributed positively in the current environment.
If conditions evolve further, we remain prepared to make additional adjustments where appropriate. Our focus is always on aligning portfolios with long-term objectives while navigating shorter-term uncertainty with discipline.
A Steady Path Forward
Periods like this can feel uncertain, but they are a natural part of investing. Rather than reacting to every shift, we believe in staying grounded in a process that balances preparation with patience.
We will continue to monitor developments, communicate clearly, and make thoughtful decisions as new information becomes available.