Stone by Stone

One of the most remarkable structures in the world, and a personal favorite of mine, is the Notre Dame Cathedral in Paris. Construction began in 1163, and the cathedral was largely completed nearly two centuries later in 1345. The craftsmen who laid the first stones knew they would never see the finished structure. Yet they continued their work carefully and patiently, trusting the plans before them and the generations that would follow.

In 2019, when a devastating fire swept through the cathedral, much of the world watched with a sense of loss. But the response was immediate. Architects, engineers, and artisans began restoring it almost at once, rebuilding what had been damaged stone by stone. The lesson is simple: enduring structures are not defined by temporary setbacks, but by the strength of their foundations and the persistence of those who rebuild them.

Investing often follows a similar path. Markets inevitably experience periods of volatility, unexpected events, and moments that test investors’ confidence. The goal is not to avoid every disruption, but to build portfolios strong enough to endure them and continue progressing over time.

The first quarter of 2026 offered a reminder of that reality.

Market Returns – First Quarter 2026

S&P 500 Index: -4.3%

U.S. equities declined during the quarter, marking the first meaningful pullback after several strong years for the market. While corporate earnings remain generally healthy, investors reassessed valuations and the outlook for interest rates amid rising geopolitical tensions. Analysts expect earnings per share to meaningfully increase in 2026, which could help stabilize and push the market to new highs later in the year.

MSCI EAFE Index (International Stocks): -1.1%

International stocks also declined but held up somewhat better than U.S. equities. An improving economic momentum in parts of Europe and Japan, and lower relative valuations helped cushion the decline. After many years of lagging U.S. markets, international diversification has continued to demonstrate its value in investors’ portfolios.

Bloomberg U.S. Aggregate Bond Index: -0.1%

Bond markets were relatively stable during the quarter. While higher yields placed some pressure on bond prices, the starting yield environment remains meaningfully higher than what investors experienced for much of the past decade. That higher income component continues to support the role of fixed income as a stabilizing force within diversified portfolios. The largest risk to US high quality bonds continues to be inflation and the risk of the Fed having to reverse course and increase rates, while we believe this is not a likely risk in the near-term.

What Drove the Volatility

Several developments contributed to the market’s uneven start to the year.

Geopolitical tensions

The conflict involving Iran and broader instability in the Middle East raised concerns about potential disruptions to global energy supplies, particularly around the Strait of Hormuz. Oil prices rose during the quarter, adding pressure to already sensitive inflation expectations. It is our view that the unpopularity of the conflict and political pressures surrounding the Iran war should only result in temporarily high oil and gas prices. However, like in any conflict, there is always uncertainty and actions that could complicate that view.

Inflation uncertainty

Although inflation declined significantly from its peak several years ago, the rise in energy prices has complicated the outlook. Investors are looking closely to see whether inflation continues to gradually moderate or stabilizes at a higher level than previously expected.

Interest rate expectations

Because inflation progress has slowed somewhat, markets have begun to reassess how quickly the Federal Reserve may be able to reduce interest rates. Expectations for a “higher for longer” interest rate environment contributed to volatility in both stock and bond markets during the quarter. That said, many economists predict at least 1 to 2 rate cuts in 2026 with inflation closer to 2% by year-end.

Perspective for Long-Term Investors

While periods like this can feel unsettling, it is important to remember that short-term declines are a normal part of long-term investing.

Over the past century, markets have navigated wars, recessions, inflationary periods, political transitions, and countless unexpected events. Yet over longer periods of time, diversified portfolios have historically continued to grow as businesses innovate, economies expand, and productivity improves.

This is precisely why portfolios are built with diversification across asset classes and global markets, rather than relying on any single economic outcome.

Looking Ahead

As we move through the remainder of 2026, several factors will likely remain central to the investment landscape:

• The path of inflation and energy prices
• The Federal Reserve’s interest rate policy
• Ongoing geopolitical developments
• Corporate earnings growth and economic momentum

None of these forces can be predicted with certainty, but they are all part of the normal cycle markets navigate over time.

Returning to the Builders

The builders of Notre Dame understood something important about lasting work: progress is rarely uninterrupted. Wars, storms, political upheaval, and even fire could damage what had been built. Yet each generation continued the work patiently and deliberately, confident that the structure would ultimately stand.

Investing works much the same way.

Markets will experience periods of uncertainty, geopolitical conflict, and economic shifts. But disciplined investing — grounded in diversification, prudent risk management, and a long-term perspective — allows portfolios to continue growing stone by stone, even when the path forward feels uneven.

Our role is to help ensure that your financial plan is built with that same kind of durable foundation.

We have updated our Annual ADV here.