April 2026
US Economy: War and Energy Uncertainty.
As the U.S.-Israel-Iran war passes a month old the impacts are being felt across the U.S. economy. Core PCE (excludes food and energy) Inflation rose slightly to 3.1% yoy and Headline PCE stayed put at 2.8%. Unemployment rose slightly to 4.4% while the second estimate for Q4 2025 GDP of 1.4% showed a significant deceleration from the 4.4% growth of Q3 2025.
US Stocks: Geopolitics and Inflation Hits.
US large cap stocks were down 5.0% in March amidst geopolitical stress and renewed concern that inflation could prove sticky in the face of higher energy costs. Industrials (-9.4%), consumer staples (-7.1%) and health care (-7.1%) were affected by supply chain turmoil, margin compression and a Medicare rate shock respectively. Technology (-4.6%), particularly SaaS companies, faced headwinds from AI disruption and Energy was up 8.1%.
Foreign Stocks: Energy Supply Risks in Focus.
Emerging (-13.1%) and non-US developed (-10.3%), both strong performers over the last year, bore the brunt of the market turmoil as the conflict’s implication on global oil supply magnified the growth hit these regions likely face in the short-term and more acutely as the conflict drags on. South Korea (-18.7%), India (-14.9%), Japan (-12.3%) are particularly dependent on oil and gas traveling through the Strait of Hormuz to power their industry heavy economies.
Fixed Income: Atypical Reactions.
While typically a counterbalance to equity volatility, Fixed Income was also broadly down in March. Rising energy prices, particularly oil and gas, saw inflation projections jump. At the same time, in a widely anticipated move, the Federal Reserve decided to pause any change in interest rates at their March meeting. The 10-year US Treasury yield rose as high as 4.4% before ending March at 4.3% flying against the usual flight to safety during conflicts as yields rose on inflationary concerns.
Real Assets: From Diversifier to Headline.
Real assets were pulled into the spotlight in March primarily through the energy and commodity lens. Oil was up over 55% and in another deviation from typical historical patterns, Gold was down 11.1% as treasury yields increased alongside a stronger US dollar. The real asset story for now appears less about steady income and more about volatility, particularly in oil, inflation sensitivity and the second-order effects on other sectors.
Alternatives: Private Credit Spotlight.
Concerns around private credit and what stress in the asset class might imply for broader markets were in focus during March. Media scrutiny intensified around certain evergreen private credit funds, particularly those with exposure to venture‑backed and SaaS‑oriented borrowers. Against a backdrop of heightened geopolitical uncertainty, investor attention shifted away from return‑seeking and toward questions of liquidity, transparency, and risk.
Source of data: Bloomberg
Equities Total Return
| MAR | 3 MO | 1 YR | |
|---|---|---|---|
| U.S. Large Cap | (5.0%) | (4.4%) | 17.8% |
| U.S. Small Cap | (5.0%) | 0.9% | 25.8% |
| U.S. Growth | (5.2%) | (9.5%) | 18.7% |
| U.S. Value | (4.8%) | 2.2% | 16.3% |
| Int’l Developed | (10.3%) | (1.2%) | 21.3% |
| Emerging Markets | (13.1%) | (0.2%) | 29.6% |
Fixed Income Total Return
| MAR | 3 MO | 1 YR | |
|---|---|---|---|
| Taxable | |||
| U.S. Agg. Bond | (1.8%) | (0.0%) | 4.3% |
| TIPS | (1.3%) | 0.3% | 3.0% |
| U.S. High Yield | (1.2%) | (0.6%) | 6.9% |
| Int’l Developed | (2.6%) | (1.1%) | (0.9%) |
| Emerging Markets | (1.3%) | (0.4%) | 2.8% |
| Tax-Exempt | |||
| Intermediate Munis | (1.9%) | (0.2%) | 4.4% |
| Munis Broad Mkt | (2.2%) | (0.2%) | 4.3% |
Non-Traditional Assets Total Return
| MAR | 3 MO | 1 YR | |
|---|---|---|---|
| Commodities | 11.5% | 24.4% | 32.3% |
| REITs | (6.1%) | 3.8% | 3.3% |
| Infrastructure | (4.1%) | 8.3% | 26.9% |
| Hedge Funds | |||
| Absolute Return | (1.3%) | (0.4%) | (0.4%) |
| Overall HF Market | (3.3%) | (0.6%) | (0.9%) |
| Managed Futures | (0.5%) | 7.8% | 10.4% |
Economic Indicators
| MAR-26 | DEC-25 | MAR-25 | |
|---|---|---|---|
| Equity Volatility | 25.3 | 15.0 | 22.3 |
| Implied Inflation | 2.3% | 2.2% | 2.4% |
| Gold Spot $/OZ | $4668.1 | $4319.4 | $3123.6 |
| Oil ($/BBL) | $118.4 | $60.9 | $74.7 |
| U.S. Dollar Index | 120.9 | 119.7 | 126.7 |
Our Take
March underscored how quickly markets can pivot when first-order shocks give way to second-order consequences. What began as a geopolitical conflict evolved into a broader test of inflation dynamics, growth durability, and longstanding market assumptions—from bonds as ballast to gold as refuge. At the same time, enthusiasm around AI gave way to tougher questions about disruption to and disintermediation of various industries/companies, and employment, particularly in software-heavy corners of the market and private capital.
On private credit specifically, recent redemption activity reflects retail investors reacting to headlines, such as fears of AI disruption leading to a so‑called “SaaS‑pocalypse,” rather than a broad deterioration in fundamentals, which in many strategies continue to look sound. Are there risks to private credit? Absolutely. There are for all risk assets. A potential disruption to global supply chains stemming from the Iran‑related conflict could further compound those risks by weighing on economic growth, with implications across markets. Importantly, the evergreen fund structures now under scrutiny are operating as designed, limiting redemptions to mitigate the risk of forced selling of illiquid assets. While private credit would not be immune in a more pronounced downturn, equities have historically borne the initial impact of economic stress, with private credit sitting senior to equity in the capital structure. We are monitoring the situation closely.
While fundamentals have not broken, crosscurrents are intensifying, and the coming months will likely hinge less on headlines themselves and more on how these pressures ultimately filter through the broader economy (especially consumption and employment), corporate earnings, and liquidity.
In our Q2 Economy Commentary, due out later this month, we dive into what has been a headline and conflict heavy first quarter. Below are some additional topics we are keeping an eye on for now:
Iran War: Geopolitical escalation involving Iran has driven near-term equity volatility as oil prices spike and uncertainty rises, but history suggest markets often stabilize once the conflict’s contours become clearer. For now, energy and defense are outperforming while cyclicals lag but the sharp rise broadly across markets to end the first quarter are a reminder to stay disciplined and broadly diversified without trying to make sector calls.
Supply Shock: Beyond oil, the disruption to shipping through the Strait of Hormuz is rippling through the global economy in ways that touch nearly every industry. Fertilizer prices have jumped sharply, a concern heading into the spring planting season. Petro chemicals and plastics prices have surged raising costs for everything from packaging to car parts. Aluminum prices have reached their highest level in nearly four years and perhaps most surprisingly, helium (a critical input for semiconductor manufacturing) prices doubled almost overnight after attacks on a Qatari facility removed a significant portion of the world’s supply. What began as a geopolitical conflict has quickly become a broad-based cost pressure that consumers and businesses alike may feel for some time.
Inflation: Higher energy and freight costs tied to the Iran war are lifting inflation expectations in early 2026. While the shock appears largely supply driven and potentially transitory—oil futures still price Brent below spot levels—the duration of disruptions around the Strait of Hormuz remains uncertain. Against this backdrop, infrastructure has remained a durable portfolio allocation and could continue to benefit as inflation pressures and near-term uncertainty persist.
Q1 Economic Slowdown: High energy prices, geopolitical volatility and sticky inflation have all left the Federal Reserve with limited room to cut interest rates despite the elevated risk of recession given the war with Iran. This environment has led to some risk-off decisions as investors shifted from speculative AI growth towards companies with proven cash flows and productive assets. These “HALO” Heavy Assets, Low Obsolescence companies, included in both the global equity and the real assets buckets, are seen as potential hedges against the instability brought on by AI.
AI scrutiny on SaaS businesses: SaaS companies, which rely on recurring license fees, face risks as AI might replace human-operated software or enable competitors to create alternatives, threatening revenue and market position. Some (if not many) of these same companies, though, may be able to leverage AI to strengthen their competitive position.
Private markets and liquidity concerns: Private equity, with exposure in SaaS companies, may face challenges as older investments risk underperforming amid AI disruption, triggering redemption requests in semi-liquid funds, similar to those experienced by private credit funds, though fundamentals remain stable and losses have not been widespread.
March 2026 was a month that reminded investors that markets don’t only react to headlines, they react to the ripple effects. In this case those ripple effects are being felt across the entire global economy from stock prices and bond yields to fertilizer costs and semiconductor supply chains. While markets have mostly absorbed the initial shock, the deeper effects on inflation, corporate earnings and consumer spending are still working their way through the system, and the path forward will depend heavily on how long this war lasts and the Strait of Hormuz reopening. Since we put forth our regime change thesis over four years ago outlining a new macro backdrop resulting in a higher steady state for inflation, interest rates and, as a result, volatility, we have been building portfolios with this moment in mind, thoughtfully designed to help mitigate risks and, where possible, take advantage of the opportunities they create.
