FLP’s quarterly newsletter containing commentary and insights on the state of investing and financial markets.
The first quarter of 2026 will be remembered in a single word: Iran. What began as a year of constructive rotation and broadening stock market leadership ended in geopolitical shock, with US-Israeli military strikes on Iran in late February igniting a regional war, closing the Strait of Hormuz, and triggering what the International Energy Agency (IEA) called the largest oil supply disruption in the history of the global energy market.
US and global risk assets delivered strong gains in 2025, supported by decelerating inflation, easier financial conditions, and a renewed Federal Reserve (Fed) easing cycle. Stocks broadly outperformed bonds with notable leadership from emerging markets and US large cap growth, both of which are heavily exposed to the still-dominant stock market driver, artificial intelligence (AI).
The third quarter of 2025 delivered one of the strongest cross-asset performances in years, despite a steady “wall of worry” that kept investors cautious. Tariffs, high valuations, labor market uncertainty, and questions over Federal Reserve (Fed) independence were all consistently worried about.
The second quarter of 2025 validated long-term investing, as President Trump’s expanded tariff proposals led to a sharp 10% decline in the S&P 500 in only two days (and an overall 21% peak-to-trough decline), followed by a historic rebound.
The first quarter of 2025 brought heightened economic uncertainty as trade policy shifts and recession risks reshaped US markets. The Federal Reserve Bank of Atlanta’s GDPNow model, a real-time “nowcasting” tool that estimates the growth rate of US GDP for the current quarter, last forecast a 2.8% contraction, while inflation remained stubbornly above the US Federal Reserve’s (Fed) 2% target.
2024 was a year of economic resilience, political turbulence, and strong financial market performance in the United States. Despite persistent fears ranging from recession to revolution, when all was said and done, a balanced portfolio consisting of 60% S&P 500 and 40% Aggregate Bond provided a total return of more than 15%.
The third quarter of 2024 saw robust performance across most major asset classes in the US, with stocks reaching all-time highs and bonds rallying as the Federal Reserve (“Fed”) began its long-awaited interest rate-cutting cycle.
It is like Groundhog Day in financial markets as we wrap up the second quarter and first half of 2024. As it was in 2023 and the first quarter of 2024, the second quarter continued to see positive surprises.
The first quarter of 2024 reflected increasingly positive investor sentiment as a consequence of increasingly positive economic fundamentals. From US corporate earnings growth to fixed income credit spreads, investors are optimistic about the coming quarters.
