Market Viewpoints
Spring 2026
By Keith Bonjour, CFP®
Senior Vice President, Portfolio Manager
The first quarter of 2026 closed with the U.S. economy still on solid footing even with the increase in oil prices and geopolitical risks. While economic growth slowed further compared to 2025, it remained positive. The economy was supported by steady consumer spending and select areas of business investment, particularly in technology and infrastructure.
Inflation continued to remain above the Federal Reserve’s 2% target, with progress uneven across different sectors of the economy. The worry is that oil prices will continue rising, and this will translate into higher inflation later in the year causing the Federal Reserve to reassess any potential rate cuts this year.
Employment conditions softened further in early 2026. Hiring slowed across several sectors, and the unemployment rate moved into the mid 4% range, signaling continued cooling in the labor market. The increase in unemployment has been driven more by slower hiring than widespread layoffs, suggesting a gradual normalization rather than significant stress. We will continue to monitor labor market conditions closely throughout 2026 for signs of stabilization or further weakness.
Following three interest rate cuts in 2025, the Federal Reserve held interest rates steady during the first quarter, maintaining the federal funds rate at 3.50–3.75%. These actions reflect a policy stance that is not as restrictive but still cautious. The Fed’s most recent projections suggest the possibility of no additional rate cuts in 2026 as opposed to the one or two cuts expected the prior month, though future decisions will depend on the path of inflation, labor market trends, and overall economic growth.
Equity markets posted modest gains during the first two months of 2026, prior to pulling back in March due to the geopolitical instability with the war in Iran and significant increase in oil prices. International equities showed periods of strength early in the quarter, supported by currency trends, though volatility increased as geopolitical concerns resurfaced causing international equities to underperform versus US equities by the end of the quarter.
As we look ahead, investors continue to weigh whether earnings growth, AI investment, and consumer spending can offset geopolitical risks that may cause inflation to trend upward complicating the Federal Reserve’s path forward.
The bond market experienced more muted returns during the quarter. Treasury yields moved higher, which limited price appreciation, though income remained attractive. Fixed income continues to benefit from higher starting yields compared to prior years and remains an important source of income and diversification within portfolios. Despite recent volatility, yields remain at compelling levels as we move further into 2026.
As we progress through the year, we remain mindful of ongoing risks, including tariff developments, geopolitical tensions, persistent inflation pressures, and labor market softness. We continue to recommend maintaining a disciplined, long term investment approach, recognizing that markets move in cycles and have historically rewarded patience.
If you anticipate any short term cash needs, please contact us so we can manage distributions proactively and help protect your portfolio from potential volatility.
Thank you for your continued trust. We remain committed to making prudent investment decisions as we navigate an evolving market landscape.