This Week in Review | Q1 Recap, Earnings Guidance, Elections

Transcript

Mathew White:

Hello, and welcome to This Week in Review. This weekly segment is designed to highlight a few important developments you may have missed this week, what they may mean for markets and most importantly, the potential impact for investors. To stay up to date with our latest market insights, subscribe to our YouTube channel or visit FisherInvestments.com. Now, let's review what happened this week.

First, a recap of how markets did in the first quarter.

Stocks rose in early January but saw sideways chop from mid January through late February and declined for most of March. This doesn't surprise us, as several headline fears dominated the news cycle in Q1. We saw news about government shutdowns, tariff updates and the ongoing conflict in the Middle East. While narrower indexes like the Nasdaq have hit correction territory, global benchmarks, such as the MSCI World Index, came close but ended the quarter above the correction line. As a reminder, a correction is a market drop of 10 to 20%. Stocks recovered some at the end of the quarter, but further negative volatility wouldn't surprise us. The war in Iran appears to be weighing on markets most. But nobody knows exactly how the conflict will unfold. Remember though, stocks are forward-looking and price- in all widely known information. War carries an immense and tragic human toll. However, market history overwhelmingly shows regional conflicts rarely cause a global economic recession or bear market. Uncertainty can cause market volatility before or during a conflict. But the market often digests the actual developments quickly and moves forward once we know more facts. Investors can take clear lessons from the first quarter of 2026. Market ups and downs are completely normal in bull markets. Volatility can occur for any reason or no reason at all. This happens even in years when stocks perform well. History shows the market rewards investors who stay disciplined. Short-term fluctuations are simply a normal part of investing in stocks. A year of solid gains will often include significant market drops. Over time, this volatility drives stocks historically strong returns.

Next, a check-in on earnings reports.

The Q4 2025 earnings season is complete. Another better than expected quarter shows the resilience of corporate America. But this is hardly a surprise for forward looking markets. Stocks have been pricing in the ongoing earnings upturn since this bull market began in October 2022. For investors, backward looking quarterly reports only confirm what stocks expected months ago. This demonstrates the market's ability to move first and highlights the danger of waiting for all clear signals. While economic fears are running high, earnings expectations point to growth across most sectors looking ahead. If those estimates hold, this will mark the sixth straight quarter of double-digit earnings growth. Business leaders remain optimistic about their company's performance. Several executives expressed confidence despite a challenging economic environment. We believe businesses will continue to benefit from a growing global economy in 2026, even with concerns about ongoing wars. Some investors might pay attention to earnings misses and cautious guidance from certain companies, but keeping a long-term perspective is crucial. Markets are forward-looking. They tend to quickly price-in widely known information. Stock movements typically happen well before companies release their final earnings numbers, investors should instead focus on key forward looking indicators across politics, sentiment and the broader economic backdrop. Taken together, we still see a supportive environment for stocks in the months ahead.

Finally, an update on global elections.

Voters often find legislative stalemates frustrating. However, equity markets usually thrive on gridlock because it reduces the risk of material policy shifts. As we noted in our recent MarketMinder article, votes in Denmark, Italy and France highlight this trend. Last month, Danish Prime Minister Mette Frederiksen attempted to consolidate power through an early election. The move backfired when domestic issues took center stage. Her Social Democrats remained the largest party but lost their absolute majority. In Italy, Prime Minister Giorgia Meloni suffered a significant setback after voters rejected a judicial reform. This doesn't immediately change the balance of power. And in France, recent local elections delivered gains for both the populist National Rally and the left leaning France Unbowed, but neither secured a dominant victory in major markets. But for investors, these recent developments likely mean a period of status quo governance in these countries where major disruptive reforms are off the table. Back in the US, primaries and a few special elections have ramped up speculation of how the November House and Senate elections will unfold. But we caution against drawing sweeping conclusions at this point. A lot can still change between now and Election Day. Where does this leave the markets? Midterm campaigning Often contributes to choppy returns in the first half of midterm election years, but stocks tend to rally in the later part of the year as election results become clear.

That's it for this week.

Thanks for tuning in to This Week in Review. If you're looking for more insights, then don't miss our other series, 3 Things You Need to Know This Week, released every Monday. You can also visit FisherInvestments.com anytime for our latest thoughts on markets. Thanks again for joining us, and don't forget to hit "Like" and "Subscribe."