Q1 Capital Market Highlights

“The one thing you could be quite sure of is if we went into some very major war, the value of money would go down … you’re going to be a lot better off owning productive assets.” (Warren Buffett, CEO of Berkshire Hathaway)

Investors Tested, As Always

We doubt Mr. Buffett expects the Iran conflict to become a “very major war,” but his point resonates. March was a month of headlines tied to bombs and threats and concerns about energy supply, but also a test of investor tolerance for short-term market concerns.

Stocks of all types fell, and oil prices and interest rates rose … as one might expect. The headlines will linger, but markets have already recovered most of the sell-off, showing us once again that the time to manage risk is before it becomes obvious, not after.

This same pattern occurred last year around the same time … a deeper price drawdown related to tariffs but similarly impactful on investor emotions. This is a feature of investing, not a bug, and those with the willingness to focus on the long-term have been rewarded with a large premium for investing in productive assets such as stocks.

Q1 Market

While the headline-driven selloff and recovery had similarities to early 2025, the market tone leading into the Middle East outbreak looked different in a few ways:

• Artificial Intelligence (AI) Divergences: We’ve moved from a full investor embrace to a process of picking out winners and losers
• Foreign Market Leadership: Major catch-up vs. US stocks coming out of the tariff battles, which continued until Iran brought energy concerns to countries that import oil and gas
• DC Clarity: Policy tailwinds were becoming catalysts for corporate spending and lower interest rates

March brought an abrupt end to all of that, with the exception of the split in potential AI outcomes. In fact, just inside of technology, we’ve seen a historic split between perceived winners (semiconductors) and losers (software). The action has been so extreme that, despite the obvious business threat, it probably puts some software closer to an opportunity than a risk.

Source: Morningstar as of 03.31.2026

For portfolios as a whole, we’re comfortable enough to have kept allocations exactly intact through the recent swings and do not expect major changes in the months ahead. March was a good test for both the growth and defensive sleeves, and while each market pullback is unique, we feel good about the balance of reward and risk in current positioning.

Pullback in Context

The Iran-sparked selloff was actually quite slow, taking 31 trading days to reach a 5% pullback. We can take comfort knowing that big drops in the past have fallen much faster in those early days:

And the early April bounce has been quite strong, another condition that has historically marked healthy markets.

Despite the uncertainty surrounding the outcome in the Middle East, that type of backdrop has historically been supportive for stocks to climb a “wall of worry”:

Rest of Year

As the conflict with Iran makes its way lower on the page, investors will likely do less of what they did in March (sell everything) and more of what they had done in the prior months (look for perceived AI-based winners and losers).

We’re in a midterm year, which has historically been the worst of the four years of the presidential cycle. But having already seen a decent pullback, that negative tendency may already have been covered.

Conclusion

In general, the negativity that hurt the market in March may have just been a healthy pause to reset the market’s balance. With earnings strong and expected to grow at a double-digit rate, the entire pullback was sentiment-driven, which we know is more fleeting than actual business results.

We’ll continue to monitor conditions and consider portfolio changes as warranted. Regarding your specific financial plan, life changes are always worth discussing. As always, we appreciate your trust and look forward to a prosperous year together.

*The views expressed represent the opinions of Compass Ion Advisors, LLC, as of the date noted and are subject to change. These views are not intended as a forecast, a guarantee of future results, an investment recommendation, or an offer to buy or sell any securities. The information provided is of a general nature and should not be construed as investment advice or to provide any investment, tax, financial, or legal advice or service to any person. The information contained has been compiled from sources deemed reliable, yet accuracy is not guaranteed.

Additional information, including management fees and expenses, is provided on our Form ADV Part 2 available upon request or at the SEC’s Investment Adviser Public Disclosure website here. Past performance is not a guarantee of future results.