What drove market performance in Q1 2026?

Market performance in Q1 2026 shifted late in the quarter as escalating Middle East tensions, centered on Iran, and rising energy prices increased uncertainty. Geopolitical developments became a primary driver of investor sentiment, while higher oil prices lifted inflation expectations and contributed to rising yields.

How did stocks perform in Q1 2026?

U.S. stocks declined 4.0% in Q1 2026, while international stocks declined 0.6%. The late-quarter selloff was broad-based, though leadership trends over the full period showed early rotation, with mid- and small-cap stocks outperforming large caps and value stocks outpacing growth.

How did bonds perform in Q1 2026?

Bond returns were mixed to slightly negative in Q1 2026 as higher energy prices lifted inflation expectations and yields moved higher. U.S. taxable bonds were flat, U.S. municipal bonds declined 0.2%, international bonds hedged to USD declined 0.2%, and U.S. corporate bonds declined 0.5%.

Which asset classes held up better in Q1 2026?

Real assets were a relative bright spot in Q1 2026. Global infrastructure securities gained 8.3% and global real estate securities rose 1.0%, while commodities gained 24.4%. International equities also held up better than U.S. equities over the quarter.

Why did energy prices matter so much in Q1 2026?

Energy prices mattered because supply disruptions tied to geopolitical tensions pushed oil prices higher, which lifted inflation expectations and led to a broader repricing of interest rates. That affected both stocks and bonds by changing the market’s outlook for inflation and policy.

What is the main takeaway from Capstone’s Q1 2026 Market Review?

The main takeaway is that Q1 2026 began on relatively stable footing but ended with a meaningful shift in tone as geopolitics, energy prices, and inflation concerns weighed on risk assets. Performance differences across regions, sectors, and styles reinforced the importance of staying focused on long-term investment strategy rather than reacting to headlines alone.

Q1 2026 Market Review: How Did Stocks and Bonds Perform?

The first quarter of 2026 saw a shift in market dynamics, with both stocks and bonds declining late in the period as escalating Middle East tensions, centered on Iran, and rising energy prices increased uncertainty. This marked a change in market behavior, as geopolitical developments—rather than economic or earnings data—became the primary driver of investor sentiment.

Beneath the surface, market performance across regions, sectors, and company sizes showed meaningful differences, including increased pressure on technology and AI-related companies as earnings expectations came under greater scrutiny. International stocks held up better over the full period despite a sharper late-quarter pullback, while leadership trends began to shift across styles and market segments.

Our Q1 2026 Market Review highlights what happened across global markets and what drove performance in stocks and bonds. Download the full report for a clear, concise breakdown of market activity across regions, sectors, and asset classes.

Download the Q1 2026 Quarterly Market Review

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Disclosures:

Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results, and no assurance can be given that any investment or strategy recommended by Capstone Financial Advisors, Inc. (“Capstone”) will be profitable. Definitions of any referenced indices are available upon request.

The information in this blog post is for general informational purposes only and is not intended as personalized investment, legal, tax, or accounting advice, nor as a solicitation of any kind. Investment decisions should be based on your individual financial circumstances, objectives, time horizon, and risk tolerance. Please contact Capstone if your personal or financial situation changes or if you wish to modify any reasonable restrictions on our investment management services.

This content is current only as of the date of publication and is subject to change without notice. A copy of our current written disclosure statement, which describes our services and fees, is available by contacting us at capstonefinancialadvisors@capstone-advisors.com or (630) 241 0833.

Market & Economic ReviewAldo Vultaggio, MBA, CFA®, CAIA®, AIF®, CPAApril 9, 2026Aldo S. Vultaggio

Q1 2026 Market Review: How Did Stocks and Bonds Perform?

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