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Market Commentary

Monthly Financial Markets Commentary — April 1, 2026

Stocks and bonds both fell in the month of March, with stock indices briefly entering correction territory before recovering at the end of the month . Selling swept through the markets with some areas of high-tech buffeted by concerns over the effects of A.I. and business development companies falling on fears of a general rout in private equity and private credit. The other big news of course was the continuing operation in Iran, which has driven up the price of oil, and raised concerns of tepid global growth as well as inflation.

By all measures, such as price-earnings, price-to-sales, market-cap-to-GDP, Schiller CAPE Ratio, stocks remain grossly overvalued. Retail investors have bought every dip in the market since 2010. Speculation in the market remains significant, with margin balances and stock ownership percentages being in record territory. Notwithstanding recent action, investors remain almost all in. Retail investors are now supposedly the smart money, as institutions have been much less enthusiastic about equities. Historically this has not been a good setup for further advances in the market.

For 2026 the S&P 500 Index, the capitalization-weighted broadest measure of U.S. stock market performance, has returned -4.30%. The Nasdaq Composite Index, another capitalization-weighted index, but more reflective of growth stocks, has returned -7.05%. Finally, the Dow Jones Industrial Average, a price-weighted index, has returned -3.12%. All returns are on a total return basis that includes dividends.

The Morningstar U.S. Aggregate Bond Index, a broad measure of the U.S. bond market, has returned -0.05% for the year. Historically the price of bonds rises on the outbreak of hostilities, as investors seek the safety of the world's currency. However, this has not been the case so far, indicating that investors may be more concerned about the fiscal situation of the United States. Credit spreads remain at very low levels, meaning that investors are demanding very little premium over so-called risk-free 10-year treasuries.

The sectors in the equity market that have performed the best so far in 2026 are Utilities, Energy, and Materials at 8.8%, 24.8% and 8.8%, respectively. Financials, Consumer Discretionary, and Information Technology have fared the worst at -9.4%, -8.9% and -8.7%, respectively. The rise in energy stocks is not surprising given the run-up in oil; the general trend in stocks appears to be "risk-off", although hard assets have gotten a bid based on concerns over deficits and inflation.

The comparison of current price/earnings ratios and dividend yields as of April 1, 2026 to those of the prior year is as follows.

* based on 12-month trailing data

The dividend yield, which is at historic lows, is a reliable metric of valuation, since it cannot be manipulated as earnings frequently are. Dividend yields continue to fall in 2026.

Gold and crude oil most recently traded at $4,752.50 and $99.85, respectively, compared to $4,290.50 and $58.25 one year earlier. Gold has fallen significantly after a spectacular rise at the beginning of the year. Veteran observers of gold were not surprised by the sell-off in gold, given it's historic run. In addition, it is likely that Middle East countries, who hold large reserves, were forced to sell some gold in the face of rapidly declining economies. Nevertheless the long-term fundamentals of gold remain very positive given the appetite for gold by central banks and the complete lack of fiscal discipline by nearly all developed nations.