Auour April Thoughts
The first quarter of 2026 served as a reminder of how quickly market narratives can shift when geopolitical and macroeconomic forces collide. What began as a relatively stable backdrop—with expectations for two Federal Reserve rate cuts during the year—quickly gave way to a more uncertain environment. The Iran conflict introduced volatility into global markets, while inflation data proved more persistent than anticipated. Together, these developments forced a rapid repricing of interest rate expectations, with markets now reflecting the possibility of no cuts and even a non-trivial probability of a rate increase by year's end.
Equity markets responded accordingly, though not uniformly. Large-cap U.S. equities declined during the quarter, with growth-oriented segments bearing the brunt of the adjustment as higher rate expectations weighed on longer-duration assets. U.S. growth stocks fell approximately 9.8% in the quarter, while broader large-cap exposure declined about 4.3%. In contrast, value-oriented and smaller-capitalization segments held up better, with U.S. value equities gaining roughly 2.0% and both mid- and small-cap stocks posting modest positive returns. This divergence reflects a continuation of the broadening trend we observed late last year, where leadership expands beyond a narrow group of companies and becomes more evenly distributed across the market.
International equities continued to provide meaningful diversification benefits. Developed markets delivered positive returns of approximately 1.2% for the quarter, while emerging markets were notably stronger, rising about 3.8%. Over the trailing twelve months, both segments have outpaced U.S. equities, reinforcing the importance of maintaining global exposure even during periods when domestic markets have historically led.
Fixed income markets remained relatively stable, though not without nuance. Core bonds were effectively flat during the quarter, reflecting the tug-of-war between persistent inflation and shifting rate expectations. Credit markets experienced a modest weakness, with both investment-grade and high-yield bonds posting slight declines as spreads widened marginally amid increased uncertainty. At the same time, shorter-duration instruments and income-oriented exposures continued to provide steady, positive contributions, highlighting the ongoing value of yield in a higher-rate environment. Over the past year, fixed-income returns have been driven largely by income rather than price appreciation, underscoring the importance of disciplined positioning over directional rate calls.
As we look ahead, the environment remains one defined less by clarity than by competing forces. On one hand, economic activity continues to show resilience, supported by strong employment and corporate balance sheets. On the other hand, geopolitical tensions and persistent inflation create the potential for policy missteps or prolonged periods of restrictive monetary policy. In this context, our focus remains consistent. We are not attempting to predict precise outcomes, but rather to manage risk in a way that allows portfolios to participate in long-term growth while remaining resilient to shorter-term disruptions.
The first quarter reinforced several themes that have been building over time: market leadership is broadening, diversification is again proving its value, and income remains a critical component of total return. While the path forward may remain uneven, these are constructive underpinnings for a more balanced and durable market environment.
A Good Bubble?
The railroads ruined a generation of investors and built a nation. The same could be said of the early internet. In both cases, capital rushed in faster than the economics could justify, prices eventually broke, and the headlines declared a cautionary tale. What they missed was what had been left behind — infrastructure that became the foundation for everything that came next. That tension is worth keeping in mind as a familiar question resurfaces today: are we in another bubble, and if so, what does that actually mean?
That pattern has a way of repeating. And right now, it feels relevant again.
Asset Placement and Titling (as tedious as it sounds)
Not all accounts are the same.
Two statements might look nearly identical—similar balances, familiar names—but the way they are structured can lead to very different outcomes over time. The type of account and the way it’s titled quietly shape how assets are taxed, how they can be accessed, and ultimately how they pass to the next generation.
Understanding that structure isn’t about becoming technical. It’s about recognizing that how things are held is just as important as what is owned.
Disclosure
This material is provided for informational purposes only and should not be construed as investment, tax, or legal advice. The views expressed reflect current opinions as of the date of publication and are subject to change without notice. Nothing contained herein should be interpreted as a recommendation to buy or sell any security or to adopt any specific investment strategy.
Any examples or discussions are intended solely to illustrate general financial concepts and may not apply to every individual situation. Readers should consult their financial adviser, tax professional, or attorney regarding their specific circumstances before making financial decisions.
Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results.
Auour Investments LLC and Integrity Financial Advisors LLC are investment advisers registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training.