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First Quarter 2026

This quarters recap: AI cools, oil spikes, and the Fed holds

First Quarter 2026: Economic Review

Presented by The PensionmarkMeridien Team

The first quarter began with momentum and ended with uncertainty and turbulence. Growth held up, inflation¹ stayed near target, and yet by March it was clear that the market’s tolerance for risk had shifted decisively. A disruption² in oil supply, tied to the conflict between the United States and Iran, threatened to reignite inflation just as cracks appeared in labor market data³.

January extended 2025’s momentum. Major indices pushed to or near record highs, buoyed by AI enthusiasm and soaring tech valuations. But the market was already becoming more selective. Companies with durable earnings and strong balance sheets were being rewarded, while high-flying tech and speculative growth names drew increasing skepticism.

Sentiment soured quickly. Growth- and rate-sensitive sectors corrected, energy and real assets moved to the front, and the broader market mood shifted from optimistic to cautious.
Below is an overview of the numbers, what’s driving them, and what to look ahead to in Q2.

MAJOR U.S. STOCK INDEXES

Equity markets changed character this quarter. Investors moved on from the valuation-driven gains that fueled 2025’s rally and toward a more demanding focus on earnings quality.

Here are where the numbers wound up at the end of Q1 2026:

The S&P 500 dropped⁴ 4.63%.
The Nasdaq 100 tumbled⁵ 5.98%.
The Dow Jones Industrial Average slipped⁶ 3.58%.

THE ECONOMY: STILL GROWING, BUT SHOWING STRAIN

The U.S. entered 2026 in reasonable shape. Household finances were solid, and January’s jobs report came in at nearly twice expectations, signaling real momentum at the outset.

However, as the quarter progressed, the tone shifted. Consumer sentiment weakened, hiring plans stalled, and February’s jobs report delivered an unexpected jolt: the economy shed roughly 90,000⁷ positions. Still, wage growth remained positive, suggesting a gradual cool-down rather than a crack.

THE FEDERAL RESERVE: HOLDING STEADY FOR NOW

At both the January and March meetings, the Fed held its policy rate steady at 3.50–3.75%, as expected. What mattered more was the shift in expectations. Markets entered the year anticipating steady rate cuts through 2026; by March, however, those expectations had been scaled back considerably, as the economy proved resilient and inflation more stubborn than anticipated.

Rising oil prices further tightened the Fed’s constraints. With energy costs threatening to keep inflation elevated, rate cuts could be delayed well into the year. The practical takeaway: don’t count on falling rates to do the heavy lifting. Policy is likely to remain restrictive — supportive of income from cash and quality bonds, but offering little tailwind for equity valuations.

OIL AND GEOPOLITICS: THE QUARTER’S WILD CARD

The defining surprise of Q1 was crude oil surging above $100⁸ per barrel by mid-March. The trigger was the United States’ armed conflict with Iran, which began on February 28 and choked tanker traffic through the Strait of Hormuz, a critical artery for global oil supply.

Since the beginning of the conflict, the war has continued to progress through March. President Trump has signaled a willingness to end the war, either through talks or force, but the true conclusion to this conflict will only be seen with time.

LOOKING AHEAD TO THE SECOND QUARTER OF 2026

April, May, and June will see key monthly⁹ releases of PPI, CPI, and Job Market data, helping paint a clearer picture of the economy’s standing as we move into the halfway point of the year. Additionally, Q2 will also feature two Federal Reserve meetings: one on April 28-29 and the other on June 16-17. Markets are currently pricing in no change in rates for the April meeting.

The long-term impacts of the war in Iran remain unseen, but most markets are feeling the strain of short-term effects, which are likely to continue as the conflict persists.

WE ARE HERE FOR YOU

This quarter was a useful reminder that diversification and disciplined risk management can be key when markets get complicated. Our team is staying attuned to what’s moving markets and are always here for you if you have questions.

Additionally, if you’d like to schedule a portfolio review, don’t hesitate to reach out. We are here to help you face whatever the markets bring next, with clarity and confidence.

If you have questions about any of the topics covered here—or about something you’ve recently seen in the news and how it may impact your investments or retirement strategy, we’re here to help! Reach out to us at (866) 871-9963 or email us at MeridienTeam@pensionmark.com.

We’re here to help you navigate with clarity and confidence.

Please consult your financial professional for additional information.

This content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and they should not be considered a solicitation for the purchase or sale of any security.

Citations:

Advisory services offered by World Investment Advisors, LLC. Securities offered by World Investments, LLC, member FINRA/SIPC. World Investment Advisors, LLC is affiliated through common ownership with World Investments, LLC. PensionmarkMeridien is unaffiliated with either World Investment Advisors, LLC or World Investments, LLC