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Q1 2026 Market & Economic Update

May 4, 2026 – Despite recent volatility, HighGround's premier long-term investment vehicle, the HighGround Capstone Fund, continues to deliver strong performance across all asset classes.  This reinforces the value of maintaining a diversified portfolio, which enables the Fund to navigate shifting market conditions with resilience.

Key takeaways from our first-quarter market update:

  1. CAPITAL MARKETS:

    • Global markets began the year with solid momentum. However, the escalating conflict in the Middle East disrupted energy production and transportation through the Strait of Hormuz, triggering a sharp spike in energy prices. Investors subsequently reassessed inflation risks and growth expectations, prompting a broad market revaluation.

    • The ICE U.S. Dollar Index declined early in the quarter, but strengthened in March (+2.4%), ending the period up 1.7% as geopolitical uncertainty increased demand for safe-haven assets.

    • Global equities (MSCI ACWI) delivered mixed results ─ rising 4.3% in January and February before falling 7.2% in March ─ closing the quarter down 3.2%. Energy surged 33.6%, the strongest performer and primary contributor to returns. Consumer discretionary (-10.9%), technology (-6.7%) and financials (-6.7%) were the largest detractors.

    • U.S. equities (Russell 3000®) erased early gains, falling 5.0% in March and ending the quarter down 4.0%. The Magnificent 7 were the largest contributors to the S&P 500’s -4.3% return as investors reduced exposure to growth equities amid inflation concerns and elevated AI-related capital spending. The equal-weighted S&P 500 rose 0.7% over the same period.

    • International equity markets (MSCI ACWI ex U.S.) outperformed U.S. markets, declining 0.7% (+1.0% in local currency). Non-U.S. Developed Markets (MSCI World ex U.S.) fell 0.9%  (+0.5% in local currency). European equities declined 2.8%, with Norway up 31.5% on strong energy performance. Japanese equities gained 1.4%, supported by a weaker yen and ongoing corporate governance reforms. Emerging Markets (MSCI EM) slipped 0.2% (+2.2% in local currency), with strong contributions from Korea (+16.5%), Taiwan (+9.1%) and Latin America (+14.6%). India (-18.1%) and China (-8.9%) were notable detractors.

    • U.S. fixed income posted early gains before reversing in March as Treasury yields rose on inflation concerns. The 10-year yield moved from a low of 3.97% (February 27) to a high of 4.44% (March 27), ending the quarter at 4.32%.

    • The closure of the Strait of Hormuz triggered an unprecedented global energy supply shock. West Texas Intermediate (WTI) oil, already up 16.9% through February, surged an additional 53.6% in March — up 79.6% for the quarter —disrupting chemical, fertilizer, and technology supply chains.

    • The stronger U.S. dollar detracted 1.7% from international equity returns.

  2. U.S. ECONOMIC GROWTH: The U.S. economy remained resilient despite the energy-price shock stemming from the military conflict in Iran. Economic indicators were mixed:

    • Consumer sentiment fell to a record low,

    • Retail sales strengthened, supported partly by tax refunds,

    • Manufacturing activity improved, with rising production and new orders despite higher costs,

    • Services sector growth slowed due to weaker new business and elevated expenses, and

    • Inflation expectations increased.

  3. U.S. INFLATION:  Inflation accelerated during the quarter:

    • Headline Consumer Price Index (CPI) rose 3.3% year over year, largely due to March’s energy spike.

    • Core CPI, which excludes food and energy, ended the quarter at 2.6%.

    • Energy prices increased 12.5% year over year, with gasoline prices rising sharply in March, accounting for roughly 75% of the monthly CPI increase.

  4. GLOBAL ECONOMIC GROWTH: Global growth had been progressing prior to the Middle East conflict and resulting energy disruptions. These developments have begun to weigh on growth expectations and increase inflationary pressures. The International Monetary Fund (IMF) lowered its 2026 global growth forecast to 3.1%, citing ongoing Middle East conflict and elevated inflation. Under adverse conditions, the IMF projects global growth could decline by 0.8%, reflecting continued energy-price pressures and heightened inflation risks.

If you have any investment questions, call our expert team today at 214.978.3300 or email info@highgroundadvisors.org.