Q1 2026 Market Commentary
The following market commentary provides context for the investment performance of your charitable assets.
From Cambridge Associates, investment advisor
Global equities (-3.2% for the MSCI All Country World Index) declined in the first quarter of 2026, as AI driven software sector weakness, US tariff policy uncertainty, and the outbreak of the Iran War in late February weighed on sentiment. Non-US developed markets modestly outperformed US stocks in USD terms, while emerging markets were broadly flat, as the US dollar weakened and investors rotated away from growth-oriented names. The United States imposed new tariffs on Canada, China, and Mexico, as well as imports of steel and aluminum, and announced several additional proposed tariffs; many impacted regions retaliated with counter levies. The Iran War, which began in late February following US and Israeli strikes on Iran, caused a spike in energy prices and added to market volatility through quarter end. US equities (-4.6% for the MSCI US Index) declined in the first quarter, underperforming developed markets ex US peers (0.9% for the MSCI World ex US Index). The sell-off was driven by a decline in growth stocks, as investors grew concerned that tariffs would weigh on global growth and that AI-driven obsolescence fears would pressure software sector revenues. Software stocks underperformed as new AI tools raised concerns about long-term revenue streams, though aggregate analyst growth expectations for the sector, both near and long term, remained unchanged. Value strategies bested growth over the quarter and small cap outpaced mega and large cap stocks.
Developed markets ex US equities (-0.9% for the MSCI World ex US Index) modestly declined in USD terms, though results varied widely by country. The United Kingdom (+2.0% for the MSCI UK Index) and Japan (+1.4% for the MSCI Japan Index) advanced, while European equities broadly fell. Country-level performance varied considerably: the Netherlands (+2.7%), Finland (+2.0%), and the United Kingdom (+2.0%) advanced, while Germany (-8.5%), France (-5.4%), Switzerland (-4.2%), Sweden (-3.8%), Austria (-3.5%), Italy (-3.4%), Spain (-3.2%), Belgium (-1.7%), and Ireland (-10.1%) declined, while Canada (+1.3% for the MSCI Canada Index) modestly advanced.
Emerging markets (-0.2% for the MSCI Emerging Markets Index) were broadly flat in the first quarter, as gains in Latin America and select markets were offset by weakness in China and India. China (-8.9% for the MSCI China Index) declined as trade tensions with the United States intensified and earlier optimism around technology and stimulus faded. India (-18.1% for the MSCI India Index) was the weakest major EM market, facing headwinds from foreign investor outflows, elevated valuations, and currency weakness. Asian equities (-1.5% for the MSCI Emerging Markets Asia Index) lagged other EM regions, weighed down by these two index heavyweights, though Taiwan (+9.1% for the MSCI Taiwan Index) advanced. Latin America (+14.6% for the MSCI Emerging Markets Latin America Index) gained the most in EM, supported by Brazil (+19.1% for the MSCI Brazil Index). Europe, the Middle East & Africa (+1.6% for the MSCI Emerging Markets Europe & Middle East Index) also outpaced broad EM. Hong Kong (+5.5% for the MSCI Hong Kong Index) advanced, while Singapore (-1.0% for the MSCI Singapore Index) modestly declined.
US fixed income assets (+0.0% for the Bloomberg US Aggregate Bond Index) were broadly flat in the first quarter. Treasury securities modestly outperformed corporate investment-grade equivalents as interest rates were little changed while spreads widened. Inflation-protected TIPS (+0.6% for the Bloomberg US TIPS 1-10 Years Index) outpaced nominal Treasuries, as inflation expectations drifted higher amid tariff related and Iran War-related price pressures. High-yield corporates (-0.5% for the Bloomberg US Corporate High Yield Index) and investment-grade credit (-0.5% for the Bloomberg Credit Index) both declined as risk-off sentiment took hold. The Federal Reserve held its benchmark fed funds rate band steady through the quarter. The US dollar broadly declined in the first quarter as investors digested the potential impacts of new US trade policies.
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