After entering the year on the heels of a remarkable 2025, the first quarter of 2026 delivered a sobering reset. The broad market pulled back meaningfully, with the S&P 500 falling 4.34% driven largely by weakness among the largest growth-oriented stocks. The Magnificent 7 (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla), which had been central to the market’s gains in recent years, came under pressure as expectations around artificial intelligence growth and profitability were reassessed, seeing the basket of stocks sold off approximately 12% for the quarter.
What the headlines did not always capture, however, is that the pullback was far from uniform. For instance, small value posted a positive return for the quarter, up approximately 5%, alongside international and emerging markets, which also turned in modest gains. This is a meaningful data point, and not simply a statistical footnote. It reflects something we have long believed: the market is larger than its most prominent names, and a portfolio that reaches beyond the concentration of megacap growth is better equipped to navigate the inevitable moments when those names disappoint. While the S&P 500 grabbed the attention, the diversified investor likely had a different investment experience coming out of Q1.
Nevertheless, as the first quarter of 2026 comes to a close, it is fair to say that the world has provided no shortage of reasons to feel unsettled. We have a military conflict in the Middle East that has disrupted global oil markets, a political environment in Washington that defies easy characterization, and a broader cultural moment where the line between investing and gambling seems to blur a little more each week.
The Iran War and Oil Markets
The most significant macro development of the quarter has been the escalation of conflict involving Iran and its impact on global energy markets. The Strait of Hormuz, through which roughly 20% of the world’s traded oil flows, has become a flashpoint for supply disruption, pushing Brent crude above $110 per barrel and contributing meaningfully to renewed inflation concerns. As a result, the Fed has held rates steady, in contrast to previous market expectations, while it weighs rising prices against a softening labor market. This seems to be a familiar theme in these commentaries over the past two years.
This is a genuinely difficult set of circumstances. But it is worth stepping back and noting what history actually tells us. Markets are no stranger to geopolitical crises. The long-run trajectory of patient investors has pointed upward, even when the near-term picture looked grim. Oil-driven inflation, while painful in the moment when we swipe at the pump, is a supply disruption that causes temporary price spikes rather than the entrenched demand-driven inflation of the 1970s. The oil futures curve is currently “backwardated,” meaning the market itself expects prices to fall over time. That does not guarantee a smooth ride, but it does provide important context.
Political Chaos
We are also aware that many of you are watching Washington with a mixture of bewilderment and anxiety. The administration’s governing style continues to generate daily headlines, and the policy environment feels more unpredictable than any of us would prefer, to say it lightly.
We acknowledge that reality without minimizing it. But we also want to share something we have observed across many election cycles and political transitions: the relationship between political sentiment and portfolio performance is weak, and the direction is often wrong. Research consistently shows that investors who allow their political views to guide their investment decisions tend to underperform those who do not. Markets are simultaneously absorbing and discounting an enormous range of information, including much of what is currently generating alarm — and they often move in ways that feel counterintuitive to our emotional read on events. The S&P 500, it should be noted, still posted strong full-year returns in 2025 despite the tariff-related volatility. You may recall at this time last year we were in the midst of a 19% drawdown stemming from “Liberation Day”. While very worrying the moment, that event passed and markets stormed to a banner year.
The Rise of Financial Gambling
Perhaps the most subtle development to address is something happening not in the markets themselves, but in the broader culture around money. Prediction markets have emerged as a new asset class where users wager on everything from election outcomes to ceasefire announcements. New investment vehicles marketed to retail investors offer options-like exposure, leveraged single-stock products, and strategies that bear more resemblance to a casino floor than to a long-term financial plan.
Kyla Scanlon, noted economist and commentator, observed that much of this reflects what she calls “financial nihilism”, a growing sense, particularly among younger Americans, that the traditional economic ladders are broken, and that speculation represents the only viable path to getting ahead. Survey data suggests that a strong majority of Gen Z and Millennials feel financially behind, which helps explain the appeal of anything that promises a fast shortcut. Prediction markets, leveraged ETFs, and sports parlay bets all carry the same basic pitch: you could be the one who gets it right.
We want to be honest with you about this: the evidence is overwhelming that these instruments extract wealth from their users far more reliably than they create it. Noviq, a fledgling competitor to Kalshi and Polymarket, highlighted that only 20% of their users make money on their site. And they presented that as a positive! The gambling economy depends on the same desperation it claims to solve.
We are not immune to the noise. When the world feels out of control, the appeal of something that feels like agency like a bet, prediction, or short-term trade is genuinely human. But the antidote to uncertainty is not more speculation. It is a well-constructed plan built to weather a range of outcomes, not predict them.
What We Believe
Markets will continue to test resolve. The Iran conflict may persist longer than hoped. Political unpredictability shows no signs of abating. And the cultural pressure to “do something” with your money will only grow louder.
Our conviction is unchanged: a diversified portfolio aligned with your long-term financial goals remains the most reliable path forward. Not because it is exciting. Because it works.
Despite the backdrop, in the days since the close of the quarter at the time I am writing this, markets have recovered strongly. The S&P 500 has crept back into positive territory on the year and gains for small caps, value stocks, and international holdings have reaching into double-digit advances for the year.
As always, please do not hesitate to reach out if you have questions or would like to review your plan.
Weathering the Storm
By: Ferguson-Johnson Wealth Management | May 1, 2026
After entering the year on the heels of a remarkable 2025, the first quarter of 2026 delivered a sobering reset. The broad market pulled back meaningfully, with the S&P 500 falling 4.34% driven largely by weakness among the largest growth-oriented stocks. The Magnificent 7 (Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla), which had been central to the market’s gains in recent years, came under pressure as expectations around artificial intelligence growth and profitability were reassessed, seeing the basket of stocks sold off approximately 12% for the quarter.
What the headlines did not always capture, however, is that the pullback was far from uniform. For instance, small value posted a positive return for the quarter, up approximately 5%, alongside international and emerging markets, which also turned in modest gains. This is a meaningful data point, and not simply a statistical footnote. It reflects something we have long believed: the market is larger than its most prominent names, and a portfolio that reaches beyond the concentration of megacap growth is better equipped to navigate the inevitable moments when those names disappoint. While the S&P 500 grabbed the attention, the diversified investor likely had a different investment experience coming out of Q1.
Nevertheless, as the first quarter of 2026 comes to a close, it is fair to say that the world has provided no shortage of reasons to feel unsettled. We have a military conflict in the Middle East that has disrupted global oil markets, a political environment in Washington that defies easy characterization, and a broader cultural moment where the line between investing and gambling seems to blur a little more each week.
The Iran War and Oil Markets
The most significant macro development of the quarter has been the escalation of conflict involving Iran and its impact on global energy markets. The Strait of Hormuz, through which roughly 20% of the world’s traded oil flows, has become a flashpoint for supply disruption, pushing Brent crude above $110 per barrel and contributing meaningfully to renewed inflation concerns. As a result, the Fed has held rates steady, in contrast to previous market expectations, while it weighs rising prices against a softening labor market. This seems to be a familiar theme in these commentaries over the past two years.
This is a genuinely difficult set of circumstances. But it is worth stepping back and noting what history actually tells us. Markets are no stranger to geopolitical crises. The long-run trajectory of patient investors has pointed upward, even when the near-term picture looked grim. Oil-driven inflation, while painful in the moment when we swipe at the pump, is a supply disruption that causes temporary price spikes rather than the entrenched demand-driven inflation of the 1970s. The oil futures curve is currently “backwardated,” meaning the market itself expects prices to fall over time. That does not guarantee a smooth ride, but it does provide important context.
Political Chaos
We are also aware that many of you are watching Washington with a mixture of bewilderment and anxiety. The administration’s governing style continues to generate daily headlines, and the policy environment feels more unpredictable than any of us would prefer, to say it lightly.
We acknowledge that reality without minimizing it. But we also want to share something we have observed across many election cycles and political transitions: the relationship between political sentiment and portfolio performance is weak, and the direction is often wrong. Research consistently shows that investors who allow their political views to guide their investment decisions tend to underperform those who do not. Markets are simultaneously absorbing and discounting an enormous range of information, including much of what is currently generating alarm — and they often move in ways that feel counterintuitive to our emotional read on events. The S&P 500, it should be noted, still posted strong full-year returns in 2025 despite the tariff-related volatility. You may recall at this time last year we were in the midst of a 19% drawdown stemming from “Liberation Day”. While very worrying the moment, that event passed and markets stormed to a banner year.
The Rise of Financial Gambling
Perhaps the most subtle development to address is something happening not in the markets themselves, but in the broader culture around money. Prediction markets have emerged as a new asset class where users wager on everything from election outcomes to ceasefire announcements. New investment vehicles marketed to retail investors offer options-like exposure, leveraged single-stock products, and strategies that bear more resemblance to a casino floor than to a long-term financial plan.
Kyla Scanlon, noted economist and commentator, observed that much of this reflects what she calls “financial nihilism”, a growing sense, particularly among younger Americans, that the traditional economic ladders are broken, and that speculation represents the only viable path to getting ahead. Survey data suggests that a strong majority of Gen Z and Millennials feel financially behind, which helps explain the appeal of anything that promises a fast shortcut. Prediction markets, leveraged ETFs, and sports parlay bets all carry the same basic pitch:
you could be the one who gets it right.
We want to be honest with you about this: the evidence is overwhelming that these instruments extract wealth from their users far more reliably than they create it. Noviq, a fledgling competitor to Kalshi and Polymarket, highlighted that only 20% of their users make money on their site. And they presented that as a positive! The gambling economy depends on the same desperation it claims to solve.
We are not immune to the noise. When the world feels out of control, the appeal of something that feels like agency like a bet, prediction, or short-term trade is genuinely human. But the antidote to uncertainty is not more speculation. It is a well-constructed plan built to weather a range of outcomes, not predict them.
What We Believe
Markets will continue to test resolve. The Iran conflict may persist longer than hoped. Political unpredictability shows no signs of abating. And the cultural pressure to “do something” with your money will only grow louder.
Our conviction is unchanged: a diversified portfolio aligned with your long-term financial goals remains the most reliable path forward. Not because it is exciting. Because it works.
Despite the backdrop, in the days since the close of the quarter at the time I am writing this, markets have recovered strongly. The S&P 500 has crept back into positive territory on the year and gains for small caps, value stocks, and international holdings have reaching into double-digit advances for the year.
As always, please do not hesitate to reach out if you have questions or would like to review your plan.
Don’t be Shy
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