April 2026 Market Outlook: Q1 Performance, Bond Yields, and Investment Opportunities
Transcript
Hello, welcome to our April 2026 investment review and outlook. I’m Ben Hockema, founder and lead advisor here at Illuminate.
We are recording this on the afternoon of April 16, 2026, so much of this data is based on the first quarter ending March 31. There may be some developments that continue into April, as it has been a very eventful couple of weeks. We are also just past the tax filing deadline, which is why I’m able to record this today.
Let’s jump right into our investment review and outlook.
Agenda
Today we will cover:
First quarter performance across asset classes
Key bond market takeaways and what they mean for you
The Iran conflict and its implications for your portfolio
Software stocks and the outlook for the rest of the year
Q1 Performance Overview
This chart looks at broad asset class performance through March 31.
Starting from the bottom:
VTI, the total US stock market, was down 4%. If you were fully invested in US stocks, you would be down 4% for the quarter.
Bonds were essentially flat at 0.5%.
Emerging markets were up 0.54%.
The US dollar index was up 1.7%.
VEU, which represents international stocks outside the US, was up 2.25%.
Gold was up 8.5%.
RLY, a broad real assets ETF, was up 15%.
Real assets performed very well, and international stocks outperformed US stocks by about 6%. It was a tough quarter if you were US focused, but diversified portfolios held up relatively well.
Equity Market Breakdown
The S&P 500 was down 4.3% for the first quarter and down 5% in March alone.
The equal weight S&P 500 was up 7% for the quarter. This shows that the largest companies drove most of the negative returns.
The Russell 2000, which represents small cap stocks, was up about 1% for the quarter.
Developed international markets were down about 1.2%.
Emerging markets were roughly flat for the quarter.
March was particularly difficult. At the end of February, the outlook looked much better.
Bond Market and Yield Curve
The yield curve shifted significantly.
Rates declined from December through late February, then rose sharply in March.
This suggests the Fed is less likely to cut rates in the near term, while long term inflation concerns are increasing.
We now have a normal yield curve, meaning longer maturities offer higher yields.
In March, bond prices fell because rates increased. However, future bond returns are now more attractive because yields are higher.
Real Assets Performance
VNQ, which represents real estate, was dragged down by weakness in office properties.
Silver was up 5.77% but experienced significant volatility.
Gold finished the quarter up 8.5%.
Uranium stocks were up about 15%.
Energy stocks showed steady growth and were one of the strongest performers.
Energy strength began in late 2025 and is not solely tied to recent geopolitical events.
Software Stocks
Software stocks such as Salesforce, Microsoft, and Oracle declined significantly.
Historically, these stocks trade at about a 50% premium to the S&P 500. That premium has now disappeared.
At the same time, forward earnings expectations have increased while prices have declined.
This creates a potential opportunity. Energy and software performance differed by about 60% in the first quarter. Large divergences like this often reverse over time.
Iran Conflict and Oil Impact
There is a major gap between perception and reality when it comes to US oil imports.
Many people believe most oil comes from Saudi Arabia. In reality, about 62% comes from Canada, while Saudi Arabia accounts for only about 4%.
This means the US is relatively insulated from disruptions in the Strait of Hormuz.
However, Asian economies are much more affected. This helps explain the weakness in emerging markets.
Geopolitical Events and Markets
Looking at 30 geopolitical events since 1939, markets tend to recover over time.
Sell offs can happen quickly, but long term trends remain positive.
For example, after Pearl Harbor, markets bottomed in 17 trading days and recovered within about a year.
During the early stages of World War II, markets fell 26% in three weeks and took about two and a half to three years to recover.
The key takeaway is that staying invested is critical.
Outlook for the Rest of the Year
There are two main themes to watch.
First is the divergence between software and energy stocks.
Second is ongoing geopolitical developments.
There are also several reasons for optimism.
The US consumer remains strong, with real spending continuing to grow.
Manufacturing activity is above 50, which indicates expansion and continued economic growth.
Valuations have improved. Earnings for the S&P 500 increased about 7%, while prices declined. This has created a better entry point for investors.
Conclusion
It has been a volatile start to the year, but diversified portfolios have held up well.
International stocks, real assets, and energy exposure all contributed positively.
Looking ahead, there is reason for optimism in the US economy over the next few quarters.
Stocks are more attractively priced, and bonds now offer higher yields.
The plan is to remain disciplined, rebalance where appropriate, and look for opportunities. This may include trimming energy exposure and adding to bonds or undervalued areas.
We are not making drastic changes, but we are staying flexible.
If you have any questions about your portfolio or financial planning, please reach out.
Thank you for your time.
