Quarterly Market Update: 2026 Q1

Market Summary

Markets closed out 2025 on a strong note, with equities extending gains into year-end and investor sentiment buoyed by resilient economic growth, easing inflation pressures, and expectations of a more accommodative Federal Reserve. Much of the market’s momentum has been driven by a narrow group of large-cap growth and technology companies, while fixed income has regained relevance as yields stabilized at levels not seen in over a decade. At the same time, global developments — including shifts in foreign bond markets, currency movements, and geopolitical dynamics — have begun to play a more visible role in shaping market behavior.

As we move into 2026, the investment landscape presents a mix of opportunity and complexity. Elevated valuations, evolving monetary policy, and rising cross-currents from abroad suggest a year that may challenge simple narratives and reward disciplined, diversified strategies. In this update, we’ll review key themes from the fourth quarter, highlight areas of potential risk and opportunity today, and share perspective on the investment challenges that may define the year ahead.

In 2025, U.S. equities delivered solid total returns, with broad domestic equity benchmarks like the Dow Jones Total Market (a proxy for the broad U.S. equity market) returning 17.05%. At the same time, international equities significantly outpaced U.S. markets, with broad global ex-U.S. benchmarks such as the MSCI ACWI ex-USA All Cap Index returning roughly 33%, markedly higher than most major U.S. equity measures and reflecting strong performance across developed and emerging markets aided by a weaker dollar and favorable macro environments abroad.

By contrast, core fixed-income markets also posted positive returns in 2025, with the Bloomberg U.S. Aggregate Bond Index delivering 7.3% — its strongest year in several cycles — driven by falling yields and rate cuts from the Federal Reserve. Gold and other precious metals delivered strong gains in 2025, benefiting from a weakening U.S. dollar, declining real interest rates, and heightened demand from both investors and central banks. The asset class stood out as an effective hedge against currency risk and geopolitical uncertainty during the year.

Gold and Silver Surge: Anatomy of the Rally

In early 2026, both gold and silver have climbed to historic price levels, with gold recently breaking above $5,500 per ounce and silver trading well above $110 per ounce — extending powerful rallies that began in 2025. Precious metals have been among the top-performing asset classes as investors shift capital in response to macroeconomic and policy dynamics.

Core drivers of the rally include:

Silver’s Dual Role: Silver’s price benefits from both traditional monetary demand and strong industrial demand, particularly in sectors like solar energy, electric vehicles, and electronics, giving it an additional macro tailwind beyond pure safe-haven flows.

Weakening U.S. Dollar: The U.S. dollar has weakened to multi-year lows, reducing the cost of dollar-priced commodities for foreign buyers and increasing demand for tangible stores of value. A soft dollar also erodes the real returns on cash and bonds, pushing investors toward alternatives such as gold and silver.

Safe-Haven Demand: Heightened geopolitical uncertainty and concerns about fiscal and monetary policy — including questions around Federal Reserve independence and expectations of future rate cuts — have reinforced precious metals’ role as a hedge against systemic risk.

The “Sell America” / De-Dollarization Narrative

Market observers increasingly discuss the current environment as part of a broader de-dollarization trend — where global investors, institutions, and central banks reduce exposure to U.S. dollar assets in favor of alternatives such as precious metals and foreign currencies. This dynamic has been fueled by:

• Dollar depreciation relative to other major currencies over recent months, weakening purchasing power and prompting diversification.
• Central bank reserve diversification, with major emerging-market economies adding gold to international reserves.
• Fiscal and policy uncertainty in the U.S., which can soften confidence in dollar-based assets and encourage allocations to real assets.

This narrative isn’t just descriptive — it’s reflected in actual flows: precious metals ETFs and physical bullion holdings have seen strong inflows, and central banks continue to accumulate gold, reinforcing structural demand rather than short-term speculative positioning.

Snapshot: What’s happening in Japan’s bond market?

Japan’s government bond market — historically one of the most stable and closely guided by the Bank of Japan (BoJ) — has entered a period of heightened volatility and rising yields. Key developments include:

• Surging yields on long-dated JGBs (e.g., 30- and 40-year maturities reaching multi-decade highs), driven by a combination of fiscal concerns, reduced BoJ intervention, and shifting investor expectations. Analysts describe this as an historic “market rebellion” against decades of ultra-easy policy.
• Volatility in currency and rates markets, with the yen’s moves drawing attention from authorities and occasional coordination signals from U.S. and Japanese officials.
• Political dynamics and fiscal policy uncertainty, especially ahead of Japan’s snap election, which have exacerbated market sensitivity to debt issuance plans and bond demand.

In practical terms, what once was an environment of near-zero yields and constant central bank support is gradually giving way to a more market-determined term structure and higher risk premiums — particularly at the long end of the curve.

Why it matters to U.S. markets and investors

1. Global interest-rate linkage and funding conditions:
Japan’s bond market is the world’s largest sovereign debt market. Higher local yields reduce the appeal of yen-funded carry trades, where investors borrow cheaply in Japan to fund higher-yielding assets elsewhere (including U.S. Treasuries and equities). As this trade becomes less attractive, global liquidity conditions tighten and risk assets can face headwinds.

2. Capital flow reallocation:
Japanese institutional investors — historically large buyers of overseas debt, including U.S. Treasuries — may shift allocations back to domestic bonds as yields rise at home. This could put upward pressure on U.S. Treasury yields if demand from abroad weakens, especially in a market already sensitive to rate expectations and fiscal dynamics.

3. Currency and macro spillovers:
Movements in Japanese yields and the yen can influence broader FX markets. A stronger yen (sometimes prompted by volatile bond markets or coordinated interventions) can reduce import costs and shift trade dynamics — with knock-on effects for the dollar and global capital flows.

4. Risk repricing in fixed income:
Rising yields in Japan contribute to a global repricing of duration risk. U.S. investors and portfolio managers watch these cross-market signals because sudden shifts in foreign sovereign yields can prompt revaluation in other sovereign markets, including U.S. Treasuries.

Bottom line for 2026 investors

The transformation in Japan’s bond market reflects a structural shift in global fixed-income dynamics — one transitioning from ultra-accommodation toward a regime where market forces, fiscal policy signals, and inflation expectations play a larger role. This evolution has implications for global interest rates, capital flows, and risk pricing:

• U.S. Treasury yields may face upward bias if foreign demand softens.
• Funding costs for global risk assets could rise as traditional carry trades reprice.
• Currency and macro linkages may amplify volatility during periods of geopolitical or policy stress.

For diversified portfolios, these developments underscore the importance of monitoring cross-border rate dynamics and liquidity conditions, not just domestic U.S. data.

Looking Forward: Investing in 2026

As we move into 2026, the investment landscape presents a more complex set of challenges for high-net-worth investors, particularly those in or near retirement. Elevated equity valuations, narrower margins for error in markets, and ongoing uncertainty around inflation and interest-rate policy suggest a year where protecting capital and managing downside risk may be just as important as capturing growth. With market leadership concentrated and global cross-currents increasing, outcomes may be less predictable, reinforcing the value of diversified portfolios, disciplined rebalancing, and a focus on high-quality assets that can generate durable income.

From a planning and tax perspective, 2026 marks a meaningful shift following the passage of President Trump’s One Big Beautiful Bill, which extends several favorable tax provisions while introducing changes to retirement and savings policy. While the continuation of lower marginal tax rates provides welcome clarity, adjustments affecting retirement accounts, contribution rules, and distribution planning increase the importance of coordinated, tax-aware strategies — particularly for retirees managing income across taxable, tax-deferred, and tax-free accounts. At the same time, estate and wealth-transfer considerations remain front and center for affluent households, underscoring the value of regular reviews and proactive planning. As implementation guidance evolves, we will continue to evaluate how these changes affect your broader financial plan and adjust strategies where appropriate.