- Arthur Schopenhauer
After three very strong years for stocks, Schopenhauer’s observation feels especially timely. Long bull-market advances can make ever-higher prices feel normal, or even permanent. Then a more volatile quarter like the one we have just experienced reminds us that even strong markets can stumble from time to time as news and events are absorbed into the economic outlook. Still, “what goes up must come down” is not always a warning sign of greater turbulence ahead. Often, it simply reflects the reality that markets pause, rapidly re-price risk in response to impactful events, and then continue moving forward after an adjustment period.
Recent months also offered a literal balloon-related reminder of just how interconnected the global economy has become. The war involving Iran and the disruption around the Strait of Hormuz affected more than oil, natural gas, and fertilizer, as widely noted in the press. The conflict also sent helium prices sharply higher as production and shipping tied to Qatar were disrupted. That matters because helium is not just for party balloons. Qatar accounts for nearly one-third of global supply, and helium plays an important role in semiconductor manufacturing, healthcare, aerospace, and other industrial processes. In some specialized applications, there is effectively no substitute, which helps explain why even a relatively small market can matter so much when it sits inside larger global supply chains.[1]
The first quarter was indeed challenging for investors. Major U.S. stock indexes moved lower as energy prices rose, inflation concerns resurfaced, and expectations for interest-rate cuts were pushed further out. Even so, the economic backdrop has not deteriorated nearly as much as market sentiment might suggest. Inflation had been showing signs of waning before the latest energy shock, the labor market has remained reasonably firm, and the Federal Reserve chose to leave short-term rates unchanged in March while continuing to assess incoming data and the evolving outlook.[2]
Fixed income markets had their own adjustment to recent events. War-fueled inflation worries put pressure on broad bond indexes during the quarter, but a more important development has been the growing stress in credit markets. In parts of private credit in particular, higher redemption requests, capped withdrawals, questions around valuations, and concerns about liquidity have all begun to surface. That is one reason we continue to favor U.S. Treasuries as the core of our bond allocations. In unsettled periods, we would rather own the highest-quality, most-liquid part of the bond market than reach for incremental yield in areas where liquidity can become less dependable just when it matters most.[3]
One constructive feature of this reset is that stock valuations have come down even as earnings expectations have generally continued to improve. Prices have fallen, but estimated earnings for S&P 500 companies have edged higher since the start of the year, and valuation multiples have compressed meaningfully from where they began 2026. That does not remove risk, but it does leave the market looking healthier than it did a few months ago. A pullback accompanied by more reasonable valuations while earnings are still growing is very different from one in which earnings and profit margins are in decline. Corporations will provide their own updated outlooks when earnings reporting season for the first quarter kicks off next week.[4]
This week’s announcement, issued late Tuesday, of a two-week ceasefire between the United States and Iran was an encouraging step. Markets responded quickly, with oil prices falling sharply and stocks rebounding as investors welcomed the possibility that a wider disruption might be avoided. We hope diplomacy prevails and that hostilities have truly ended. At the same time, early reports of continued attacks and Vice President JD Vance’s description of the arrangement as a “fragile truce” are reminders that geopolitical risks rarely disappear overnight.
If anything, the speed of the market’s response reinforces the broader point of this letter. Markets can re-price risk quickly in either direction. That is one reason it is often unwise to let short-term volatility, whether driven by fear or relief, dictate long-term portfolio decisions. History offers helpful context here. Going back to 1980, the S&P 500’s average peak-to-trough intra-year decline has been a little over 13%. More importantly, despite those pullbacks, the index has delivered an average annual price gain of 13.6%, with positive returns in 83% of those 46 years. Even meaningful drawdowns have often proved to be temporary interruptions rather than lasting breaks in trend. That is worth remembering after a few weeks like these, when short-term turbulence can feel much more significant than it often looks in hindsight.[5]
As we look ahead, the key question is no longer simply whether tensions ease, but whether this ceasefire proves durable enough for markets to turn their attention back toward earnings, business investment, and the broader economic backdrop. For now, we think patience, quality, and diversification still make sense for most investors. Volatility can test conviction, but it does not usually reward abandoning a thoughtful long-term plan.
As always, we encourage you to reach out at any time to discuss your portfolio to ensure your mix of assets is appropriate and aligned with your financial goals. Last, if you know anyone who might enjoy reading this newsletter or benefit from Evermay’s perspective and services, please feel free to forward it – or, better yet, have them give us a call. We’d be happy to hear from them.
Warmly,
Mitch Schlesinger
Chief Investment Strategist
[1] World Economic Forum, “The Strait of Hormuz crisis affects more than just oil. Here are 9 other commodities,” April 1, 2026; J.P. Morgan Asset Management, “Can the Iran war disrupt AI chip production?,” March 2026.
[2] Reuters, “S&P 500 heads for worst quarter since 2022 as Iran war, rate worries rattle Wall Street,” March 31, 2026; Reuters, “US consumer inflation steady before Iran conflict,” March 11, 2026; CNBC, “U.S. payrolls rose by 178,000 in March, more than expected, April 3, 2026;
[3] Reuters, “Private credit fund bonds were flagging risks before recent redemptions” March 25, 2026.
[4] Franklin Templeton, “From the US Market Desk: Volatility rising. Stay with the plan.,” March 27, 2026; John Butters, FactSet, “S&P 500 Earnings Season Preview: Q1 2026,” April 2, 2026.
[5] Research by Evermay Wealth Management LLC, S&P 500 Drawdowns, 1980-2026 YTD.
Important Disclosure Information
Evermay Wealth Management, LLC (“Evermay”) is a registered investment adviser. For more information about Evermay’s advisory services, please request a free copy of our Firm Brochure.
Past performance is no guarantee of future results. All investments involve risk, including loss of the principal amount invested. Diversification and asset allocation strategies do not ensure a profit and do not protect against a loss, especially during periods of market downturns.
This information is educational in nature, and not as a recommendation of any particular investment strategy. Given various factors, including changing market conditions, the views and opinions expressed are subject to change.
Statements herein reflect opinions regarding future financial or economic performance. Such statements are “forward-looking statements” based on various assumptions, which may not prove to be correct. Certain information contained herein was derived from third party sources as indicated. While the information presented herein is believed to be reliable, no representation or warranty is made concerning the accuracy of the information presented.
Please contact Evermay if there have been any changes to your financial situation or investment goals or if you would like to add or modify any reasonable restrictions to your investment portfolio.