Market Update 4/10/26

Market Update: Navigating Volatility Through Diversification

The start of 2026 has brought a noticeable increase in volatility, with tensions in the Middle East most recently driving market concern. Please see our key thoughts below:

• Well-constructed, diversified portfolios are specifically designed for environments like this. While U.S. stocks have faced pressure year-to-date, most other asset classes have demonstrated positive performance.
  • Positive returning asset classes year-to-date (through 4.9.26) include:
    • Direct Credit
    • Private Equity
    • U.S. Value stocks
    • U.S. Small Cap
    • International Stocks
    • Emerging Markets
    • Real Estate
    • Infrastructure
    • Core Fixed Income
    • High Yield Bonds
• We believe it is important to stay disciplined, remain diversified, and focused on long-term objectives, as short-term market movements and geopolitical events are inherently difficult to predict and time.
• Despite market turbulence, the underlying economy remains resilient, with positive economic data trends and expectations for continued corporate earnings growth.
• The current two-week ceasefire is an encouraging development, and we are hopeful it may lead to a more durable de-escalation and eventual resolution.

Bumpy Start to Year

Several factors have contributed to a more unsettled market environment, including ongoing concerns about AI-driven disruption, elevated market concentration, and stretched valuations, which have particularly weighed on mega-cap technology stocks. More recently, geopolitical conflict in the Middle East has pushed energy prices higher and introduced additional uncertainty around potential spillover effects for the global economy. Taken together, these dynamics have led to a bumpy start to the year.

Diversification at Work

Periods like this reinforce a core principle of our investment philosophy: diversification matters most when markets become more uncertain. While U.S. equities – especially large-cap technology stocks – have faced pressure year-to-date, other asset classes have demonstrated resilience. Value stocks, small-cap stocks, international markets, and alternative investments such as private equity, direct lending, and real assets like real estate and infrastructure have produced positive returns. This dynamic has helped offset weakness in more concentrated areas of the market.

Well-constructed, diversified portfolios are specifically designed for environments like this. When markets become more volatile, having exposure to asset classes that may zig when the market zags can benefit overall portfolio performance.

Economic Resilience Remains Intact

Despite the recent increase in volatility, the broader economic backdrop has remained relatively constructive. It’s important to note that the economy entered the recent period of volatility on a relatively strong footing, and we don’t believe recent developments have fundamentally derailed that momentum. March’s strong employment report underscored the relative health of the economy leading into the Middle East conflict.

Consumer spending has continued to hold up well, supported by solid household balance sheets, and economic data has generally come in ahead of expectations. Corporate fundamentals also remain strong, with expectations for another quarter of strong earnings growth for S&P 500 companies. While inflation remains above the Federal Reserve’s long-term target and there are ongoing questions surrounding the health of the labor market, the overall economy appears to be in relatively good shape.

Geopolitical Developments: What We’re Watching

Recent developments in the Middle East have added another layer of uncertainty to markets. The current two-week pause is an encouraging development, and we are hopeful it may lead to a more durable de-escalation and eventual resolution. We are closely monitoring the status of the Strait of Hormuz, a critical global energy route, as its reopening could help ease energy prices and reduce broader economic pressures. That said, geopolitical events are inherently unpredictable, and markets may continue to experience near-term volatility as the situation evolves.

Staying Disciplined in Uncertain Times

It remains too early to determine how these developments will ultimately unfold, and we would not be surprised to see continued market fluctuations in the near term. In periods like this, our guidance remains consistent: stay fully invested, maintain well-diversified portfolios, and avoid attempting to time geopolitical events or short-term market movements.

Importantly, the strongest stock market days often immediately follow the weakest days during times of market dislocation. Missing even a small number of these strong market days can have a meaningful impact on long-term investment outcomes. Over time, economic fundamentals, innovation, productivity, and corporate earnings have historically been the primary drivers of investment returns – and we believe those drivers remain intact.

Market volatility can be uncomfortable, but it is also a normal part of investing and often temporary. Periods like this highlight the value of disciplined portfolio construction, thoughtful diversification, and a long-term perspective. We remain focused on aligning portfolios with our client’s financial plans and long-term objectives.

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