Q1 2026 Market Insights

Markets finished 2025 on a strong footing, despite a notable rise in volatility driven by the prolonged U.S. government shutdown and concerns around AI-related valuations.

Financial markets delivered broad-based gains in the third quarter of 2025, reflecting optimism around easing trade tensions, easier financial conditions, and resilient corporate earnings. Revisions to previously reported job data have provided the Federal Reserve with greater flexibility to implement additional interest rate cuts. Corporate earnings growth, led by technology and AI-related sectors, has been strong, and the passage of the One Big Beautiful Bill Act is expected to provide an additional near-term tailwind toward improved profitability. The combination of looser monetary policy and solid earnings growth should create a constructive environment for equities in the near term. We highlight the constructive environment for equities in the near term.

Amid geopolitical shocks and sweeping new tariffs, the S&P 500® Index surged 10.78% for the quarter, reaching an all-time high. While market volatility reflected uncertainty around trade policy and global conflict, long-term fundamentals—including inflation, earnings growth, and monetary policy—remain the key drivers of performance. With interest rates likely to stay elevated, corporate earnings—especially among AI-driven firms—are poised to play a central role in shaping returns. We highlight the importance of staying focused on fundamentals, avoiding short-term noise, and maintaining a long-term investment perspective.