Markets have turned more volatile, but that doesn’t necessarily change the bigger picture.
Here, we introduce three themes that could impact the market in the weeks ahead.
It Was a Rough Quarter for U.S. Stocks, But There Were Pockets of Strength – The first three months of 2026 were difficult for U.S. stocks. The S&P 500 notched its worst quarterly performance since 2022, declining -4.6%. But weakness wasn’t broadly distributed. Energy stocks surged 34% in the quarter, posting their best quarterly performance in four years. What began as a tailwind tied to developments in Venezuela became a much larger story as conflict with Iran disrupted global supply expectations and sent oil prices higher. Agriculture has also been a beneficiary of tightening supply chains and higher oil prices, which has boosted demand for biofuel inputs like corn and soybeans. And then there’s the defense sector, supported by growing geopolitical instability and expectations for higher military spending in the U.S. and abroad. Taken together, the quarter’s winners offer a useful reminder of why diversification can have an important impact in a volatile period. In a market where the headline indexes were under pressure, exposure to areas tied to commodities, defense, and other real-economy themes helped offset weakness elsewhere. Leadership rotated quickly, and not necessarily toward the sectors that had led in prior years.1
How Investors Should Navigate Headline Risk
When markets send mixed signals, it’s easy to lose sight of what really matters. But periods like this often reward investors who stay focused on fundamentals, not short-term moves.
Our guide, How Investors Should Navigate News Cycles vs. Market Cycles2, helps you stay grounded when markets feel noisy.
Inside, you’ll find:
If you have $500,000 or more to invest, click on the link below to get your free copy today!
Download Our Guide, “How Investors Should Navigate News Cycles vs. Market Cycles2”
What Easier Capital Rules Could Mean for Banks – Regulators took a meaningful step toward easing post-financial crisis safeguards last week, proposing changes that would allow U.S. banks to hold less capital against potential losses. The revisions, tied to long-debated global Basel standards, would reduce capital requirements modestly—by about 2.4% for the largest banks and somewhat more for smaller institutions.On the surface, this is largely good news. After years of tighter regulation following the 2008 financial crisis, and renewed scrutiny after regional bank failures in 2023, easing capital requirements is a win for the banking industry.Lower capital buffers can free up balance sheet capacity, potentially supporting more lending, higher dividends, or increased share buybacks. But the actual economic impact may be more neutral.For one, the magnitude of the change is relatively small for the largest institutions, which dominate lending activity. More importantly, banks don’t make lending decisions based solely on regulatory minimums. Loan demand, credit quality, and economic conditions tend to play a far bigger role. Even with slightly lower capital requirements, banks are unlikely to dramatically expand risk-taking if the broader environment doesn’t support it.Second, there is also a longer-term consideration. Regulatory frameworks have shifted repeatedly over the past decade, depending on the political and economic backdrop. That uncertainty alone can encourage banks to maintain a cushion above minimum requirements, rather than deploy newly freed-up capital aggressively.Bank performance, and credit growth more broadly, tends to be driven by fundamental forces like economic activity, interest rate dynamics, and borrower demand.3
The Fed Signals a Longer Wait on Rate Cuts – In a speech this week, Fed Chairman Jerome Powell made clear the central bank is inclined to hold interest rates steady, even as rising oil prices tied to the Iran conflict ripple through the global economy. Historically, policymakers have tended to look through energy shocks, viewing them as temporary disruptions that monetary policy is poorly equipped to address in real time. But his comments also underscored a key shift in thinking. After several years of above-target inflation, the Fed is increasingly focused not just on current price pressures, but on inflation expectations. If rising energy costs begin to change that psychology, the Fed may be forced to respond more aggressively, even if economic growth is slowing at the same time. For now, officials appear content to wait. The Fed held rates steady at its most recent meeting, and recent commentary suggests policymakers are unlikely to move unless there is clear evidence that inflation is falling, or that the labor market is weakening more materially. The bottom line, in our view, is that earlier expectations that the Fed would lower rates at an upcoming meeting are fading fast.4
Staying Focused in a Noisy Market Environment – Volatility can make headlines feel more urgent—but reacting to them can lead investors off track.
Our guide, How Investors Should Navigate News Cycles vs. Market Cycles5, breaks down how to stay focused on what truly drives long-term results. It includes:
If you have $500,000 or more to invest, click on the link below to get your free copy today!
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