1st Quarter 2026 Review

• S&P 500 companies delivered 14.0% year-over-year earnings growth in Q4, marking the fifth consecutive quarter of double-digit growth and exceeding the 8.3% expected at quarter start
• Geopolitical tensions escalated significantly with the start of war with Iran in late February, US capture of Venezuelan President Maduro, and strained NATO relations over Greenland purchase attempts
• Silver experienced extreme volatility with a 31.4% single-day decline on January 30, while the Supreme Court's 6-3 ruling against emergency tariff powers prompted a new 10% 'global tariff' policy

Q1 2026 Market Summary

Market Performance

Major U.S. indices (S&P 500, NASDAQ, Dow) posted negative returns in Q1 2026, with growth indices declining across all market capitalizations. Despite market weakness, the S&P 500 delivered strong Q4 earnings growth of 14.0% year-over-year—the fifth consecutive quarter of double-digit growth—significantly exceeding the 8.3% initial forecast.

Economic Indicators

Economic data remained resilient: unemployment fell to 4.3% in March, initial jobless claims held near 200,000, and Core CPI came in below expectations. ISM Services rose to October 2024 levels in February. However, Consumer Confidence dropped on inflation and employment concerns, while pending home sales declined approximately 9% month-over-month in December.

Geopolitical Developments

Heightened geopolitical tensions dominated Q1. The U.S. captured Venezuelan President Maduro, gaining control over oil exports. War with Iran began in late February, with uncertainty surrounding potential Strait of Hormuz closures emerging as a critical market factor. President Trump's pursuit of Greenland and NATO tariff threats created tensions with European allies, though a framework deal provided some relief.

Policy and Political Events

The Supreme Court ruled 6-3 against Trump's emergency tariff powers, prompting implementation of a 10% global tariff with potential increases to 15%. The Fed held rates steady in January, with expectations for no changes through Chair Powell's tenure. The Justice Department launched a criminal investigation into Powell, while Kevin Warsh was nominated as the next Fed head.

Treasury markets strengthened in February, with 10-year yields dropping 30 basis points below 4%.

Sector Performance

Semiconductors significantly outperformed software in January. Precious metals showed extreme volatility—gold posted its eighth consecutive monthly gain while silver experienced a dramatic 31.4% single-day decline on January 30.