2026 First Quarter Letter
March 30, 2026 • By David K. MacLeod, CFP®, CFA
As we write this in late March, we see that the market’s reaction to the war in Iran has generally followed the pattern we would expect from conflict in the Middle East. Volatility has increased, oil prices are up sharply, and gas prices have spiked. However, the national average gas price of $4 per gallon isn’t unprecedented; we last saw prices at these levels in 2022. Both the markets and the Federal Reserve appear to be taking a wait-and-see approach. An interest rate cut later this year is still on the table.
Balanced investment portfolios are down roughly 2-3% year-to-date after seeing strong gains in 2025. We understand that the decline is especially uncomfortable when the news is dominated by the war and the uncertainty about what comes next. But we want to highlight that geopolitical risks are always present in the markets. And while history doesn’t repeat, it often rhymes. Markets have weathered past world wars, energy crises, and terrorist attacks. We do not know how long the current drawdown in U.S. stocks will last, but past declines have eventually been followed by recovery and new highs.
We believe the broad economic and investment landscape remains intact at this point. We acknowledge that the conflict could last longer than expected and that inflation could move higher; however, the points in our "6 Investing Themes for 2026" article in last month’s newsletter remain relevant. Artificial intelligence (AI) capital spending is fueling economic growth and corporate earnings, even as it has become a new competitive risk for established software companies. The current environment is a good reminder to diversify and avoid overconcentration in large growth stocks. We’re pleased to see value stocks holding up relatively well this year and continue to see opportunities in value and international stocks.
Where do we go from here? If stocks continue to decline, we’ll look to rebalance in a disciplined way. That would generally look like trimming bonds and buying more stocks (at cheaper prices). So far, we haven’t had much opportunity to do that because stocks are still up a lot over the past 12 months, despite the recent pullback. We won’t make panic moves because reactionary decisions often do more harm than the original event. Selling at a loss and buying safe investments like CDs is hard to reverse and can lead to poor real investment returns after considering inflation. We cannot control things like wars, recessions, or market shocks. In fact, we should expect these to occur regularly. We recommend focusing on what you can control through a disciplined long-term financial plan.
Please don’t hesitate to reach out to our advisor team if you have any questions about your portfolio. If you’d like to review your financial plan with us, feel free to contact our office to schedule an appointment.