Latest / Markets with Megan: A Quick Financial Markets Update / A Brutal Whipsaw Start to 2026 | S3 E134 | 04-01-26

Transcript

A Brutal Whipsaw Start to 2026 | S3 E134 | 04-01-26 · Markets with Megan: A Quick Financial Markets Update

• 0:00
  Megan Horneman: Investors have really been whipsawed in the beginning of 2026.
• 0:05
  Megan Horneman: It is Wednesday, April the 1st, and this is Markets with Megan.
• 0:08
  Megan Horneman: If you like this podcast, you can subscribe, hit the alarm bell, share with your friends, family, or colleagues.
• 0:14
  Megan Horneman: Typically, we come to you to discuss economic data and what it's doing to the markets, but today we want to give a brief recap of the first quarter of 2026 because it was a very interesting quarter and in fact pretty disappointing for investors across many different asset classes.
• 0:32
  Megan Horneman: Now, investors had to deal with the tensions in the Middle East, the war with Iran, surging energy prices.
• 0:39
  Megan Horneman: We had private credit fears that spilled into the public corporate debt markets.
• 0:44
  Megan Horneman: And then we had quite a bit of hawkish central bank rhetoric, which really investors had to reprice expectations for interest rate cuts this year.
• 0:54
  Megan Horneman: Now let's start with just looking at the equity markets.
• 0:57
  Megan Horneman: The MSCI All-Country World Index that had its is is off to its worst start to a new year since 2022.
• 1:05
  Megan Horneman: It was primarily led by the large cap US market because we did see a rally in the Latin American emerging markets.
• 1:13
  Megan Horneman: Again, very commodity focused, and we'll talk about that in a minute.
• 1:17
  Megan Horneman: But when you look at the SP 500 and the Nasdaq, these were the big laggards here in the U.S.
• 1:23
  Megan Horneman: We did see volatility measured by the VIX index.
• 1:27
  Megan Horneman: It jumped to the highest level that we've seen since Liberation Day of last year.
• 1:31
  Megan Horneman: We saw not only the Dal Jones industrial average, but the Nasdaq and the Russell 1000 growth index, they all entered correction territory during the quarter.
• 1:41
  Megan Horneman: That's a drop of 10% or more.
• 1:43
  Megan Horneman: Within fixed income, we saw the 10-year jump to an eight-month high.
• 1:47
  Megan Horneman: And that's primarily because of the surge we had in energy prices because of the war with Iran.
• 1:53
  Megan Horneman: That caused an increase in inflation expectations.
• 1:56
  Megan Horneman: We saw one-year inflation expectations jump to the highest since 2022.
• 2:02
  Megan Horneman: Basically, a complete pricing out of any Fed rate cuts this year, even a small chance of potentially a rate hike.
• 2:09
  Megan Horneman: We saw that merge during the first quarter.
• 2:12
  Megan Horneman: Credit was weaker.
• 2:14
  Megan Horneman: That's because of those fears in the private credit market.
• 2:16
  Megan Horneman: We had many different publicly traded asset managers halt redemptions of some of their funds.
• 2:22
  Megan Horneman: That led to high yield spreads or that extra yield you get over treasuries.
• 2:27
  Megan Horneman: That widened to the most we've seen since Liberation Day as well.
• 2:31
  Megan Horneman: Even some of those safe havens like gold and silver, they struggled.
• 2:35
  Megan Horneman: We saw gold drop about 19% during the quarter, almost entering bear market territory.
• 2:41
  Megan Horneman: We saw silver drop 40%.
• 2:43
  Megan Horneman: So was fully in bear market territory in the first quarter.
• 2:47
  Megan Horneman: And that's primarily because when you do have some indiscriminate selling, investors come in and sell the winners.
• 2:53
  Megan Horneman: And we do know that the precious metals were quite a bit up, had seen such a significant rally over the past year.
• 3:00
  Megan Horneman: We saw the dollar rise, which was also rare.
• 3:02
  Megan Horneman: Energy was really the big story.
• 3:05
  Megan Horneman: We saw that surge in crude oil prices, not only in WTI, but also in Brent.
• 3:10
  Megan Horneman: WTI traded firmly above $100 a barrel.
• 3:14
  Megan Horneman: That filtered over into gasoline prices, touching over $4 a gallon.
• 3:19
  Megan Horneman: That's the highest since 2022 as well.
• 3:23
  Megan Horneman: So a very, very volatile quarter for investors.
• 3:26
  Megan Horneman: Now, when we look at the past couple trading days, though, we saw a really nice rebound specifically to close out the quarter yesterday.
• 3:34
  Megan Horneman: We saw a rebound in the SP 500 of about 3%.
• 3:38
  Megan Horneman: We saw both the NASDAQ and the Russell 1000 growth index jump about 4%.
• 3:43
  Megan Horneman: We did see the biggest drop in the VIX that we've seen in here since in over a month.
• 3:48
  Megan Horneman: So this was a pretty big kind of risk back on sentiment that we saw.
• 3:53
  Megan Horneman: The reasons behind this were we did get some media news about the optimism about the war ending, possibly the Strait of Hormoose opening up.
• 4:04
  Megan Horneman: And then we also saw some bargain hunting here.
• 4:08
  Megan Horneman: Remember that in the when you look at the, we mentioned the NASDAQ that was down in correction territory.
• 4:13
  Megan Horneman: But when you look at some of the bigger magnificent seven names, Microsoft, Meta, Google, these names were all down from their recent peak of over 20%.
• 4:22
  Megan Horneman: Microsoft was down 34% from its recent peak.
• 4:26
  Megan Horneman: So when you do tend to see some risk sentiment come back on, you will see these bargain hunters come back in.
• 4:32
  Megan Horneman: And we did see that yesterday, a big close on the equity market to close out the quarter.
• 4:37
  Megan Horneman: It didn't help to end the quarter in positive territory, but it did take some of that, um, some of the blow out of what we've seen from the from the rest of the quarter.
• 4:47
  Megan Horneman: Now, what do we think going forward?
• 4:49
  Megan Horneman: Yes, there are some signs that maybe we are winding down the war with Iran.
• 4:53
  Megan Horneman: We are just very cautious about that because we've been here before.
• 4:57
  Megan Horneman: Um, we don't have any real legitimate root answers out of Iran yet.
• 5:02
  Megan Horneman: We will get the president speaking tonight, the Wednesday evening, about where we are with the war with Iran.
• 5:08
  Megan Horneman: And even if the war with Iran ends today, let's keep in mind we can't just turn back on that straight of hormous immediately.
• 5:16
  Megan Horneman: We have to get those tankers moving.
• 5:18
  Megan Horneman: We should have some supply chain disruptions here in the near term.
• 5:21
  Megan Horneman: This can be inflationary.
• 5:23
  Megan Horneman: We talked about it and some of the indicators in the ISM manufacturing index that are showing some that inflation is a concern.
• 5:31
  Megan Horneman: So even though we may have the action that may end, and we're not significantly sure that that's there yet, um, we don't know what those impacts will be on economic growth in the coming months.
• 5:43
  Megan Horneman: We haven't seen any of the economic data until really today with that ISM manufacturing index.
• 5:48
  Megan Horneman: So it was a nice and welcome close to the end of the quarter yesterday.
• 5:52
  Megan Horneman: We're cautiously optimistic that there is some bargain hunters in here, but we also um or would be very cautious about jumping all in with the with the market up a little bit here.
• 6:02
  Megan Horneman: We still do see a lot of headwinds in the market in the coming months as we get the data of what this this war has done from an economic standpoint.
• 6:11
  Megan Horneman: That's all we have today.
• 6:12
  Megan Horneman: If you want a history of our podcast, you go to Markets with Megan.fm.
• 6:16
  Megan Horneman: Thank you.