First Quarter 2026 Market Review

To paraphrase The Beatles, when I find myself in times of trouble… I look at the data. The S&P 500 Large Cap reached its peak on January 27th and ended the 1st quarter down -4.63% from that level. No one had on their prediction list that a major war in the Middle East would generate such a small market reaction.

Not surprisingly, S&P 400 Mid Cap (+2.15%) and S&P 600 Small Cap performance (+3.09%) were slightly positive over the period. These firms are somewhat less impacted by international events than large multinational firms and have managed the disruption well. International stocks were essentially unchanged from the start of 2026, with Developed Markets down (-1.87%) and Emerging Markets closing the quarter down slightly (-0.05%).

Economic sector performance shows Energy clearly the quarterly leader with a return of +32.5%. Some of that benefit flows into the Mid Cap discussion above as the United States no longer is unambiguously harmed with energy price increases and many of those upstream producers react directly to oil price rises (and subsequent declines).

In closing, the rise of the price of oil flowing into inflation data will cause the Fed to hold on any rate cuts until the Iran war ends, the Straits of Hormuz are once again navigable, and the world oil market moves toward a more normal state—it will take a few months after the end of hostilities for that to take place.