Quarter 1
April 2026
Equity markets entered 2026 with elevated valuations, particularly in areas tied to the AI theme. These rich valuations, amidst a backdrop of three consecutive calendar years with double-digit returns for the S&P 500, had many investors bracing for volatility in the new year.
On February 28th, the US and Israel launched attacks on Iran. Energy prices spiked and a volatile March ensued. Renewed expectations of high inflation took hold, and equities sold off. Leadership rotated toward fundamentals like balance sheet strength, earnings durability, and valuation discipline. The S&P 500 and the NASDAQ finished the quarter down -4.3% & and -7.0%, respectively.
Higher energy prices are of chief concern. They can damage the economy by reducing real income and by creating hawkish sentiment amongst central bankers. If persistent, the latter reduces the likelihood of stimulative rate cuts in 2026. After making steady progress earlier in the quarter, inflation crept up in March. The Consumer Price Index (CPI) rose 3.3% year‑over‑year, up from 2.4% in February, reflecting renewed pressure from the conflict in Iran.
While many broad-based indices were down in the quarter, regional and sector returns varied. Energy, utilities, materials, and consumer staples were all positive for the quarter, a reminder that diversification matters. Much like building a competitive World Cup roster, thoughtful portfolio construction starts with balancing star power and reliability. A team needs scorers, defenders, and a goalkeeper; a portfolio needs different return drivers. These may come in the form of growth, income, and defensive exposures.
Diversification also means carrying depth; not every holding will lead every quarter, but having multiple contributors can help manage drawdowns and keep the long-term plan on track. In the first quarter, exposure to value-oriented companies, fixed income, and real assets all helped mitigate volatility.
As we look ahead to the markets (and the World Cup!), all should be reminded that success is a long-term pursuit. World Cups are not won in the opening match. They are won by teams that advance methodically, adapt to changing conditions, and remain composed under pressure. Investing is no different. Well‑diversified portfolios are built to endure uncertainty, not eliminate it. Staying aligned with long‑term objectives remains the most reliable strategy as the remainder of 2026 unfolds.
Securities offered through M Holdings Securities, Inc. a registered Broker/Dealer, Member FINRA/SIPC. Investment advisory services offered through Cornerstone Advisors Asset Management, LLC which is independently owned and operated.
This material is prepared by Cornerstone Advisors Asset Management, LLC (“Cornerstone”) and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of April 2026 and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by Cornerstone to be reliable, are not necessarily all inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by Cornerstone, its officers, employees or agents. This material may contain ‘forward looking’ information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader.
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