Newsletters

April 8, 2026

Quarter Ending March 31, 2026:

Quarterly Performance                        Q1 Index                 YTD                    Close

Dow Jones Industrial Average                -3.6%                   -3.6%             46,341.51

NASDAQ Composite Price                         -4.6%                  -4.6%             21,590.63

Standard & Poor’s Averages                     -7.1%                  -7.1%               6,528.52

 Q1 2026 Market Summary

The first quarter of 2026 was defined by rising geopolitical tensions, renewed inflation concerns, and

increased volatility across global markets. After beginning the year with strong momentum, investor

sentiment shifted sharply in late February following U.S. strikes on Iran and escalating conflict in the Middle

East. The resulting spike in energy prices raised inflation expectations and pressured both equities and bonds.

The three major indices registered their worst quarterly performance since the second quarter of 2022. The

Nasdaq, S&P 500, and Dow closed the first quarter of 2026 down a respective 7.1%, 4.6%, and 3.6%.

Technology stocks experienced notable pressure as investors reassessed the impact of artificial intelligence on

software business models. U.S. software stocks declined roughly 23% through late February, as concerns

grew that new AI capabilities could disrupt traditional Software-as-a-Service models. At the same time,

investors began scrutinizing the ability of large technology firms to generate adequate returns from rising AI-related

capital spending.

Persistent inflation pressures kept the Federal Reserve on hold, with policy rates remaining in the 3.50%–

3.75% range. Rising energy costs reduced expectations for near-term rate cuts and contributed to higher bond

yields late in the quarter.

While equity markets declined modestly, credit markets began signaling rising financial stress. Corporate

credit spreads widened, with the CDX index reaching a nine-month high even as the S&P 500 remained near

record levels. Historically, widening credit spreads have often preceded broader equity market weakness.

At the same time, equity valuations remain elevated. The Cyclically Adjusted Price-to-Earnings (CAPE) ratio

recently exceeded 40, a level rarely seen outside the peak of the dot-com bubble. Typically, such valuations

have been associated with lower long-term market returns.

Looking ahead, several factors will influence markets in the coming months. The duration and impact of

Middle East tensions on global energy supply, inflation expectations and the timing of potential Federal

Reserve rate cuts, signals from credit markets regarding economic stress, and political uncertainty as the U.S.

midterm elections approach.

The events of the first quarter reinforce a truth we have long held: markets are unpredictable in the short term,

but value endures. While geopolitical tensions, inflation pressures, and stretched valuations present real

challenges ahead, they also create the conditions in which disciplined investing has proven most rewarding.

We remain deeply focused on protecting and growing your capital, guided by the same principles that have

served our clients well through previous periods of uncertainty. As always, we welcome your questions and

look forward to updating you on our progress.

Lastly, we wanted to provide clients with a public service announcement. Cyber threats are a constant in

today’s world. At QAM, we go through extraordinary measures to make sure client’s information is kept

confidential and safe. Please note that Schwab should NEVER reach out to a client directly. If you do get a

call from a Schwab representative, tell them you are going to contact your advisor for assistance.

Have a great Spring and please reach out to us with any questions.

Jeffrey L. Farni, Sr. 

John C. Farni