The year started out quietly, with the market moving sideways in January and February. But beginning in early March, the Iran conflict changed the tone—driving the S&P 500 down -4% for the quarter amid significant volatility.
A market rotation favors our approach
So far this year, we’ve seen a rotation in the marketplace. Even before the Iran conflict, the growth leadership of recent years began to come under pressure due to extended valuations and concerns that AI may make some established companies obsolete.
In their place, more stable, “real-world” companies—those with tangible assets and defensive characteristics—have stepped in. This development has benefited our value-focused approach. The energy sector is a good example. With the Iranian conflict putting a squeeze on global supplies, energy has jumped +38% since the start of the year.
More inflation, fewer rate cuts
Those increased energy prices have reignited inflation worries—pushing interest rates higher and the 10-year Treasury yield up to 4.31%. This puts the Federal Reserve in a tough spot, forcing it to move away from the rate cuts many were expecting. Right now, the market is pricing in zero rate cuts for the remainder of 2026.
Steady positioning endures
In times of high-profile headlines and dramatic market swings, many people feel a bit uneasy. That’s why we continue to emphasize a high-quality, defensive posture. Whether in our stock portfolio or our bond holdings, we believe low-volatility assets provide stability. No matter what the market throws at us in the coming months, we remain comfortable with our positioning.
If you have any questions or concerns, we’re always happy to discuss your portfolio and our investment philosophy. To set up a meeting, contact any member of our team at 800-998-9773.
Data Sources: Koyfin, Black Diamond, CME Group, Allied Calculations