The first quarter of the year was anything but quiet for global markets. Investors navigated renewed geopolitical conflict in the Middle East, rising energy prices, shifting interest‑rate expectations, and sharp market swings. Unsurprisingly, headlines focused on volatility—and on the decline in major U.S. stock indexes like the S&P 500.
But there’s an important story beneath the surface: many asset classes held up well, and some delivered positive returns, reinforcing why a well‑balanced portfolio matters—especially during uncertain times.
A Narrow View Can Be Misleading
U.S. large‑cap stocks, particularly growth‑oriented technology companies, struggled during the quarter. The S&P 500 finished the quarter down roughly 4–5%, marking its weakest quarterly performance since 2022.
This decline, however, was concentrated. A small group of mega‑cap stocks did most of the dragging. When investors broadened their view beyond those names, results looked quite different.
Where Markets Held Up—or Moved Higher
- Energy and Commodities
As conflict disrupted energy supplies and shipping routes, oil and gas prices surged. This pushed energy stocks and broad commodity indexes sharply higher, making commodities one of the strongest‑performing asset classes of the quarter.
This is a reminder that real assets often play a defensive role when inflation and geopolitical risks rise.
- Value Stocks and Smaller Companies
After years of growth stocks dominating, value‑oriented stocks outperformed growth, and small‑ and mid‑cap companies held up better than large‑cap peers. In fact, equal‑weighted U.S. stock indexes significantly outperformed the traditional market‑cap‑weighted S&P 500.
This broadening of market leadership is a healthy sign and benefits diversified portfolios.
- International Markets
While many global markets were pressured by the Iran war in March, the overall international index was down -1.99% through March, vs. the S&P 500 down -4.81%. Understanding this is a Q1 recap, it is worth noting as of 4/14/26, the international index is up 7.02% vs. the S&P 500 down 0.24%
This highlights the value of maintaining international exposure rather than relying solely on U.S. stocks.
- Income Remained Important in Bonds
Bond markets were volatile as inflation concerns resurfaced and interest rates moved higher. While prices declined in some areas, yields are now meaningfully higher, which improves long‑term income potential for patient investors. Certain areas—like short‑duration bonds, mortgages, and municipals—proved more resilient than expected.
Importantly, higher yields today can translate into stronger forward returns over time.
What This Quarter Reinforced
Despite unsettling headlines, Q1 delivered a powerful reminder:
- Markets do not move in unison
- Leadership rotates—often quickly
- Diversification works, even when it doesn’t feel like it in the moment
Periods of geopolitical stress and volatility are uncomfortable, but historically they have also created opportunities for diversified investors who stay disciplined and focused on long‑term goals.
Below is a chart to show historic crises and events, and the performance of the S&P 500 since 1970:
Why We Often Use a “Quilt” to Explain Markets
When clients look at market performance, it’s natural to focus on one index—most often the S&P 500. But markets are far broader than any single benchmark. One of the most helpful ways to see that is through what we call an asset class performance quilt.
What Is a Market “Quilt”?
A market quilt is a visual chart that shows how different asset classes perform side‑by‑side over time. Each “square” in the quilt represents a different asset class—such as U.S. stocks, international stocks, bonds, real assets, or commodities—ranked from best to worst in a given period.
Over time, the quilt begins to look patchwork‑like, because leadership constantly shifts.
Below is the quilt chart going back to 2016, including a year-to-date and March 2026 perspective:
Why This Matters for Long‑Term Investors
During periods of uncertainty—whether driven by geopolitical conflict, inflation concerns, or interest‑rate changes—it can feel uncomfortable to stay invested. The quilt helps put those moments in perspective.
Rather than asking “What’s the market doing?” a better question is often:
“Which parts of the market are doing well—and do I own them?”
That’s why we build portfolios designed to hold multiple pieces of quilt, not just one square.
Bringing It All Together
Q1 reminded us that:
- Headlines don’t tell the whole story
- Markets are more diversified than they appear
- Patience and balance are powerful advantages
While short‑term volatility is unavoidable, disciplined diversification has historically rewarded long‑term investors—especially during uncertain and rapidly changing environments.
*A diversified portfolio does not assure a gain or prevent a loss in a declining market. There is no guarantee that any investment strategy will be successful or will achieve their stated investment objective.