Quarterly Client Update Q1 2026
The spring weather appears to be here to stay, and you may even be seeing youth sports teams heading back outdoors. Mike is in his first season as the head coach of his son’s travel baseball team, and after months of indoor practices, the games have finally begun.
One of the early lessons he is trying to instill in a group of 12-year-olds is that, especially in baseball, you cannot focus solely on the outcome. You may square up the ball perfectly and still get out. You might hit a weak grounder and find a hole for a base hit. The scoreboard, in many cases, does not tell the full story of how the team actually played.
The stock market in the first quarter felt a lot like that.
If you only looked at the “scoreboard”, the headlines or the performance of a handful of widely followed companies, you might come away with the impression that it was an extremely difficult quarter for investors. U.S. stocks declined modestly, with the broad market down just under 4%1.
But the “box score” tells a more complete story.
Much of the decline in the S&P 500 was driven by a small group of large technology companies, the so-called “Magnificent 7.” These companies have played an outsized role in market returns in recent years, at times driving much of the market’s gains. In the first quarter, however, their pullback accounted for 75% of the S&P 500’s decline2. Outside of those names, the broader market was far more resilient than many expected.
In fact, several important trends emerged beneath the surface1:
- U.S. small value stocks gained +4.96%, while large growth stocks declined -9.78% (smaller companies held up better than larger ones overall)
- U.S. real estate was up +4.64%
- International developed stocks declined -0.94%, while emerging markets declined just -0.17%
These differences are meaningful. They highlight just how varied the experience within the market was, even during a quarter that, on the surface, appeared broadly negative.
This is exactly how a diversified portfolio is designed to behave. Leadership rotates. Areas that have led in one period may lag in the next, while others step in to provide balance. While it can feel uncomfortable in the moment, this shifting leadership is a feature, not a flaw, of long-term investing.
Periods like this also serve as a reminder of an important principle: markets are forward-looking. Prices adjust quickly as new information becomes available; whether that is geopolitical events, changes in interest rates, or shifts in economic expectations. By the time something becomes a headline, it is often already reflected in market prices.
That is why reacting to short-term developments can be so challenging and often counterproductive. The discipline to stay invested, even when the “scoreboard” looks discouraging, has historically been one of the most reliable ways to capture long-term returns.
Back on the baseball field, Mike will probably hold off on explaining market concentration and diversification to his players anytime soon. But hopefully the underlying lesson of the scoreboard versus the box score was helpful in understanding the stock market this quarter.
And much like investing, the longer you stay in the game, the more you realize just how unpredictable any single inning, or quarter, can be.
As always, if you have any questions or would like to discuss your plan in more detail, we are here for you.
Sources:
1Dimensional Fund Advisors, Quarterly Market Review, Q1 2026. US Market (Russell 3000 Index), Large Growth (Russell 1000 Growth Index), Small Value (Russell 2000 Value Index), US REITs (Dow Jones US Select REIT Index), International Developed (MSCI World ex USA Index), Emerging Markets (MSCI Emerging Markets Index). Indices are not available for direct investment.
2Animal Spirits episode 459. MSFT -21.7%, TSLA -15.1%, META -10.7%, GOOGL -8.8%, NVDA -7.6%, AMZN -7.1%, AAPL -6.4%
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss.
Investment advice offered through Private Advisor Group, a registered investment advisor.