Market Report: April 2026

There is so much going on in the world these days that it makes your head spin. Political and economic issues, multiple wars, elections, changing seasons, and more that can be hard to keep up with and can add stress to already stressful lives. One way to deal with these issues is to have a strategy in place that can guide through the complexities of life. We are hearing the word “strategy” a lot lately, mainly in terms of what the President’s strategy is for the war in Iran, but it also applies to many aspects of our daily lives, even if we do not think of it that way. According to AI (from Google), strategy is defined as “a comprehensive, long-term plan designed to achieve specific goals under uncertainty, often by allocating resources to build a unique competitive advantage. Key elements include defining “where to play and how to win,” resource allocation, and creating a unique, sustainable system of activities.”  To boil it down, it really means having a long-term plan to deal with whatever circumstances you are trying to work through. This squarely fits with what we feel is appropriate and necessary to achieve long-term investment results: have a plan, review the plan, and stick to the plan barring any major disruptions that force one to alter the plan. We will weave the idea and benefits of an investing strategy or plan throughout this commentary as we review the markets and the economy.

Financial Markets

Investment plans or strategies are best when set for the long-term, but they are certainly impacted by short-term results. The issue is whether one alters one’s plan based on short-term results, which can feel like chasing after the wind. After having a few years of stellar results in the markets (at least in concentrated areas of the markets), it can be disconcerting to see the markets pull back – even if that pullback is less than a correction. That is what this year has felt like, as many of the major indices have been tripped up by a combination of excess valuations and outside forces such as the war in Iran. International equities (MSCI EAFE down 10.73%) and large cap domestic stocks (S&P 500 down 4.98% and the DJIA down 5.2%) all fell during March, but all are down less than 5% year-to-date. The NASDAQ fell 4.68% during March and is down 6.96% year-to-date, but as of the end of March it had not entered correction status. Small-cap (S&P 600) and mid-cap (S&P 400) stocks fell during the month by 4.07% and 5.39% respectively but remain positive year-to-date. Bonds completed the cycle by falling in March as the Bloomberg U.S. Aggregate Bond index fell 1.76% but remains flat year-to-date.

The outlook continues to be cloudy as valuations remain elevated (see below) and the war adds uncertainty to the mix.  The markets are searching for a reason to correct, which could reset longer term expectations, but any such correction should not last long (think last March and April or October and November) due to continued strong earnings growth. Just as the markets have been looking for a reason to correct, they also now are looking for a reason to move higher, based on how they react to the news from the war and energy prices. Unfortunately, this just means more volatility in the short term.

Here is the most recent data regarding several market valuation indicators. Note that the data is as of March 31st, 2026 (Buffet Indicator as of April 7^th, 2026), and while all have improved slightly (combination of pullback and continued earnings growth), they still indicate that the markets are strongly overvalued, except for the P/E metric which has improved to just overvalued.

The Economy

As mentioned last month, there are many economic data points, but none seem as important right now as inflation. It is this point that is causing the volatility we are seeing in the markets and has caused the Fed to pause in cutting interest rates. Ultimately, concerns over inflation (due to energy prices) can spill over into the rest of the economy should the consumer cut spending. There are certainly areas of the economy that continue to grow as evidenced by manufacturing and business reports such as the ISM index (ticked higher in March to 52.7) and the Chicago PMI (fell to 52.8 in March) which both are still solidly in expansion territory. First quarter GDP estimates are stronger than last year and could help set the stage for a solid year of economic growth. Consumer sentiment continues to decline, but the consumer continues to spend. The question is how long, given the sharp rise in energy prices, although higher tax refunds will help as well. Alternatively, energy producers are having a field day and should report much higher earnings over the next couple of quarters, and investors should reap the benefits. Wages continue to tick higher, albeit at a slower pace than inflation (at least over the past month or so), and job creation came back in March after February’s losses. A mixed bag to be sure, and short-term planning or strategizing is problematic, but times like these emphasize the need for a long-term strategy that allows one to ride through periods of heightened volatility and uncertainty.

GDP (Gross Domestic Product) – Considered the main measuring stick for the economy, our gross domestic product would argue that we continue to chug along at a measured pace. While GDP cooled a bit in 2025 (2.2%) versus 2024 (2.8%), estimates for 2026 split the difference between the two years. GDPNow estimates first quarter GDP to be 1.3% as of 4/7/26 versus a decline of 0.5% in the first quarter of 2025. As a result, we may be positioned better this year for growth than last year, pending the results of the war. However, agonizing over particular pieces of data, at least in the short term, is highly problematic due to the unknown impact the war will have on the economy this year and beyond.  

Inflation – All those short-term plans that were made based on expectations of inflation trending lower (or at least stabilize) have been pushed aside due to the skyrocketing price of energy from the war. As of this writing, the data for March has not yet been reported and so we can only report on the February data, which showed an increase of 0.3% that month, leaving the CPI at 2.4%. While this rate will surely be higher when the March numbers come out, Truflation is reporting a rate of 1.28% as of 4/2/26. Given that there has been no ceasefire and only minimal traffic coming through the Strait of Hormuz, it is likely that energy prices will remain elevated for some time and will negatively impact inflation data.  While approximately 20% of global oil consumption normally passes through the Strait daily, that flow has slowed to a trickle, forcing countries that depend upon that supply to seek other sources. China, for example, is working with Russia to meet some of their need, and the U.S. can help Europe and Japan. Domestically, we should be fine as we do not rely upon what comes through the Strait, but the problem we face is that energy prices are set globally, impacting everyone, including us. Once again, short-term plans or strategies may not work due to the disruption caused by energy prices.

Employment – Using employment data as an ongoing measuring stick for the economy has become messy in recent years and can be more akin to following the bouncing ball. The data at times seems to contradict other economic news and because it is constantly being adjusted (some would say manipulated), it can be harder to strategize over in the short-term.  While national data is being reported on, state and local data has not been updated by the U.S. Bureau of Labor Statistics since December (due to the ongoing partial government shutdown?). Nationally, the unemployment rate ticked lower in March to 4.3% as 178,000 jobs were added during the month. Jobs were added in several sectors including health care, construction, transportation, and warehousing, while the federal government continued to shed positions. The Sahm Rule ticked lower to 0.20 in March, showing significant improvement from earlier this year, and it remains well below the 0.50 mark that would indicate a recession could be imminent. With the unemployment rate holding reasonably steady for several months and the Sahm Rule coming off recent highs, strategizing for stable economic growth seems to be more in the cards than planning for a recession, although, like everything else, the impact of the war may not be fully felt yet.

The Fed Watch

The Fed, like the economy, is in a state of flux right now. A new Chairman (likely Kevin Warsh) will take over soon, economic data is a mixed bag, and the increase in energy prices from the war are all making the decision about what to do with interest rates more difficult. With energy prices spiking, inflation (at least in the short run) will head higher as well, meaning a decision to cut rates further could cause inflation to go even higher. With March’s employment report, the Fed does not need to cut rates right now. The Fed will continue to hold rates steady until energy prices calm down and the change in leadership occurs. While expectations for the number of rates cuts in 2026 have reduced to one or none, there are also those that are calling for a rate increase if energy prices cause inflation to rise significantly. The Fed seems to always be in a no-win position, and certainly that is what it feels like right now and so expect the Fed to remain data driven in the short term. Hard to strategize in the short term over what the Fed might do given all the uncertainty.

Outlook/Summary

Having a strategy provides many benefits, but only if the strategy is followed. Too many get caught up in short term distractions and mistakenly alter their plans. This is not really a strategy, but fearful decision making, misguided day trading, or attempts at market timing, all of which tend to fail. Having a strategy also does not mean being overly aggressive nor overly conservative (although both can be strategies for the right person), but it does mean having a plan in place that can work over a market-cycle or other longer time periods. The benefits of having an investing strategy in place are that it allows one to navigate through uncertain times (like the present) and provides a clear path towards one’s goals. Modifications, or tactical adjustments, to elements of the plan (perhaps tweaking the allocation towards more growth than value, increased international exposure, etc.) are certainly allowable and appropriate within the constraints of the overall strategy and can provide some comfort for those that feel the strategy may be too limiting or narrow-minded. 

Given the current environment, what are investors to do? Here are several ideas (note that the ordering of them is less important than following them): First, make sure you have a plan or strategy in place. Second, stick to it. Third, do not panic. Sometimes it is easier to say that than to do so, but one thing that might help is to not focus on the market’s impact on your portfolio constantly. Studies have shown that investors that review their portfolio monthly are happier than those who do so daily, those that review it quarterly are happier than those that do so monthly, and so on. Fourth, look at the macro picture of the economy and note that the economy and earnings are growing and do not get caught up in the minutiae of the day-to-day news of the war and its short-term impact on inflation, etc. Fifth, stay diversified. Sixth, do not try and time the markets. As we have said here many times in the past, studies have shown that those that try and time the markets lose out, as missing just a few of the up days can cause considerable damage to returns. Finally, review these steps and, if necessary, re-evaluate your overall risk tolerance and adjust long-term asset allocation targets considering that reflection. However, do not make emotional decisions that look good in the short term but fail over the longer term.

While the potential for a correction or other market drawdown has increased, it also could create some opportunities that have not been there for some time as valuations improve. Our strategy has not changed, and we will continue to try and protect against the downside while also seeking upside return. We will not time the markets but will continue to utilize diversified portfolios that can take advantage of market rallies and be protective during market pullbacks. This strategy has been a proven winner in the long run, and we are confident that it will continue to.

Should you like to discuss your portfolio or learn if our strategy can work for you, please call the Wealth Management division of Lake Ridge Bank at (608)826-3570. We look forward to speaking with you.

Market/Economic Data

As of March 31st, 2026…. Unemployment data is through March for national, December for Wisconsin (preliminary) and Madison (preliminary); inflation data is through February, Truflation as of 4/2/26:

Thank you for your business – we look forward to speaking with you soon. (Note – this commentary used various articles from JP Morgan, Morningstar, the Wall Street Journal, Investor’s Business Daily, Northern Trust, CNNMoney.com, msn.com, Kiplingers.com, nytimes.com, Fidelity Investments, American Funds, LPL Financial and other tools as sources of information.

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