Global Macro Commentary – April 2026

Key Takeaways

• Market regime shifted sharply in Q1 2026: focus moved from AI-led growth optimism to inflation, war risk, and higher-for-longer rates.
• Geopolitics became the main driver: the March 1 Israel-Iran conflict pushed oil sharply higher, increased volatility, and raised concern about a potential Strait of Hormuz disruption.
• Equities weakened and broadened out: the S&P 500 fell 4.3% in Q1, while the Nasdaq dropped 5.8%; leadership widened beyond mega-cap tech.
• Tech lost momentum: software and AI-linked names came under pressure as investors questioned whether heavy AI spending will translate into near-term returns.
• Fixed income was volatile: Treasury yields first fell on recession hopes, then reversed higher as inflation and geopolitical risks intensified.
• Commodities and real assets strengthened: the outlook favors energy, precious metals, and alternative assets as inflation and supply-shock hedges.
• Risk view remains cautious: valuation, macro, global risk, and technicals were mostly flagged cautious, while earnings were viewed as neutral.
• Base case is stagflation: the commentary assigns the highest probability to stagflation (40%), followed by recession (30%), with lower odds for steady growth or robust recovery.
• Portfolio positioning is defensive but selective:
  • maintain high-quality U.S. equity exposure
  • diversify internationally
  • keep intermediate-duration, high-credit-quality fixed income
  • use alternatives/liquid real assets selectively
• Bottom line: the firm is emphasizing diversification, quality, liquidity, and inflation protection over concentrated growth exposure.

What a Difference a Month Makes

The first quarter of 2026 marked a dramatic shift in capital market dynamics as the US-Israel war with Iran, which commenced on March 1st, fundamentally altered the investment landscape. What began as a positive quarter for equities turned sharply negative in March as oil prices surged and inflation fears resurfaced. The S&P 500 declined 4.3% for the quarter. Fixed income markets experienced pronounced volatility as Treasury yields spiked from sub- 4% levels in late February to 4.88% by quarter-end amid inflation concerns.

While the markets were focused much of the 1st quarter on heavy investment and borrowing for the buildout of AI Infrastructure, and on whether these hyperscalers would see a return on investment anytime soon, the markets were jolted by the shock of a sudden military attack on Iran. This changed the dynamics of the global economy and thus, for the financial markets. Brent crude oil prices surged over 60% in March alone, with prices reaching the $113-$120 per barrel range by late March. Some analysts warned that oil could reach $150-$200 if the Strait of Hormuz remained closed.

Higher inflation, a weak labor market, and increased uncertainty in the current geopolitical landscape prompt us to review and revise our near-term assumptions, with inflation higher and economic growth lower. For equities, the market has broadened beyond the largest tech stocks, but there are now shifts toward price increases in the energy, health care, and consumer staples sectors. For fixed-income assets, we believe the focus should be on short duration and increased inflation protection. Liquidity and transparency, along with non-correlated exposure to commodities and real assets, should be the focus for alternative assets. We believe that defensive portfolio allocations with proper diversification are even more relevant for investors now, as we move into the next stage of heightened global uncertainty.

EQUITIES

The S&P500 returned -4.3% in Q1 2026, with the quarter characterized by two distinct phases. January posted modest gains as softer economic data raised expectations for Federal Reserve rate cuts. The quarter deteriorated sharply following the outbreak of the Iran war on March 1, with March alone posting -5.0% returns as energy prices surged and inflation fears intensified.

The Nasdaq 100 declined -5.8% for the quarter, underperforming the broader market as technology stocks faced dual headwinds from AI disruption concerns and deteriorating risk sentiment. Notably, Microsoft posted its worst quarterly performance since Q4 2008, declining 23.4%, and experienced its worst start to any year since going public in 1986.

A significant leadership rotation emerged in Q1, with the average S&P 500 stock outperforming the capitalization-weighted index by nearly +5%. This represented a material broadening of market performance after two years of extreme concentration in mega-cap technology.

Software stocks experienced severe pressure in the first two months of the quarter, declining 23% through February 27 as investors grew concerned that new AI capabilities would threaten the software-as-a- service (SaaS) business model. This concern spread to adjacent technology sectors and even impacted private credit markets, where many software companies are financed. Additionally, investors increasingly scrutinized whether hyperscalers could deliver adequate returns on the massive AI-related capital expenditures they were announcing (approaching $650 billion for 2026).

FIXED INCOME

The Treasury market experienced pronounced volatility characterized by two distinct regimes. From January through mid-February, yields declined as softer economic data suggested sooner-than-expected Federal Reserve rate cuts. The 10-year Treasury yield fell to 3.97% by the end of February, driving bond prices higher.

The outbreak of the Iran war on March 1 reversed this trend dramatically. Rather than serving as a safe haven, Treasury yields surged across the curve as markets priced in higher inflation from energy price shocks. The 10-year yield climbed to 4.88% by quarter-end (some sources cite 4.32% on April 3, suggesting volatility persisted). This represented approximately a 90- basis-point swing from the February low.

ALTERNATIVE ASSETS

Our focus in the alternative asset area remains in commodities and real assets. A bias to raw materials and actively managed commodity exposures remains intact. Higher inflation, coupled with strong demand and limited supply, should place greater upward pressure on commodity prices in the near term. The headwinds of a prolonged conflict in Iran, coupled with a step-up in runaway government spending, continue to make the case for higher inflation and sustained demand for precious metals and alternative energy sources.

MARKET PERFORMANCE AS OF March 31, 2026

Valuations - Cautious

US market valuations remain expensive even after the recent sell-off. The S&P 500 is trading at 20.4x forward 12-month earnings, above the 10-year average of 18.9. On a trailing 12-month basis, the S&P 500 is trading at 24.6x vs the historical median of 18x. Valuations overseas look relatively attractive vs the US. where developed markets, as measured by the MSCI EAFE, are trading at a 3% discount to their 20-year average. Emerging market equity valuations also look attractive, with a 12-month trailing P/E of 17x and a forward P/E of 13x. Bottom line, International equities, both developed and developing markets, offer significant discounts to US markets while maintaining solid earnings growth prospects

Earnings - Neutral

Despite market weakness, corporate earnings expectations remained robust. The S&P 500 is projected to report 13.2% year-over-year earnings growth for Q1 2026, which would mark the sixth consecutive quarter of double-digit earnings expansion. Revenue growth is expected at 9.7%, the highest since Q3 2022. Company guidance proved notably positive, with 59 companies issuing positive EPS guidance versus 51 negative, well above historical averages. Information Technology and Energy sectors saw the largest upward revisions.

Macroeconomic - Cautious

Q4 2025 GDP growth was estimated at approximately 2.7%, with full-year 2026 projections of 2.1-2.3%. Growth remained supported by AI-related capital expenditures, fiscal stimulus from tax cuts, and resilient consumer spending, though momentum began to moderate as the quarter progressed. Of course, with the advent of the war in Iran, these dynamics were turned on their head. Inflation dynamics shifted dramatically during the quarter. Bloomberg Economics' big-data price tracker showed US CPI jumped to 3.4% year-over-year in March from 2.4% in February, with rising fuel prices the primary culprit. This represented a sharp reversal of the disinflationary trend that had prevailed through early 2026.

Economic & Geopolitical Risks - Cautious

On March1, 2026, theUnitedStates and Israel launched coordinated strikes against Iran targeting key military an civilian infrastructure. Iran retaliated by effectively closing the Strait of Hormuz through attacks on commercial shipping and regional energy infrastructure. Multiple tankers were struck in Gulf waters, and insurance companies refused to underwrite passage through the strait. Iranian forces targeted refineries, terminals, and LNG facilities across the Gulf Cooperation Council states. With no agreement on the table for a ceasefire and the Strait of Hormuz held hostage, we stand by our current stagflation odds at 40% and have raised the odds of recession to 30%.

Technical/Sentiment - Cautious

Equity indexes are trading below both their 50-day and 200-day moving averages, with little support or resistance due to high intraday volatility. Inconsistent news coming out of Washington and its impact on global markets have only benefited those entities that benefit economically from excessive trading. Investor sentiment has been shaped by significant uncertainty and a shift toward defensiveness. Recession and inflation concerns have increased significantly, as has the VIX (volatility). For now, a lot is riding on the effects of a Strait of Hormuz shutdown and on how long it takes energy suppliers to get back online once the Iranian conflict is over.

DISCLOSURES

The statements herein are based upon OAR Financial LLC's (OAR Financial) opinions and the data available in the publication. They are subject to change at any time without notice. This communication does not constitute investment advice and is for informational purposes only. It is not intended to meet the objectives or suitability requirements of any specific individual or account. It does not guarantee that any model's investment objective will be met. An investor should assess his/ their investment needs based on his/ their financial circumstances and investment objectives. Neither the information nor any opinions expressed herein should be construed as a solicitation or a recommendation by OAR Financial or its affiliates to buy or sell securities or investments or hire any specific manager.

OAR Financial prepared this Update utilizing information from a variety of reliable sources, including, but not limited to, custodians, mutual fund companies, investment managers, Morningstar, Bloomberg, other third-party service providers, and, in some cases, as directed by the client or their representative.

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