April 2026

Insights & Observations

Economic, Public Policy, and Fed Developments

• While the war in Iran clouds the economic outlook, data released in March continues to support our view that the market has been worried about the wrong side of the Fed’s dual mandate.
• February’s employment report, released after our last Review and Outlook, may have been abysmal, with an initial estimate of -92k jobs lost. But, with BLS disclosing a large strike and data suggesting a substantial weather effect, we anticipated a sizeable March rebound. Fed Chair Powell’s reference to a “combined strike and weather effect of about 80k” in his FOMC Q&A should have garnered more attention than it did. Even so, we were surprised by the magnitude of the beat, with new jobs gains of +178k in March nearly tripling the consensus estimate.
• We think this report should be interpreted with caution, though. About half of that gain reflected an unwinding of strike and weather effects in February if Powell’s estimation was correct. The average hourly earnings miss in March was probably due to weather effects and lower income workers returning to work, but the annual growth rate is now down to +3.5%; still elevated, but the slowest wage growth since the pandemic. Finally, after leading the Establishment survey throughout the second half of last year, the Household survey is now lagging the Establishment survey’s growth. We think the YTD hiring average of 68k a month is probably a better indicator of labor demand than the most recent report.
• All the same, the economic event most likely to take the Federal Reserve off hold would have been a bad March labor report. With March as strong as it was, this raises the bar to interest rate cuts, and we feel the market is finally right in expecting the Fed to remain on hold for some time.
• The inflation picture appears to have not been improving even before war broke out. While CPI and PCE inflation reports were both in line with expectations, February’s PPI producer inflation was hot, +0.7% headline and +0.5% at the two “core” readings. Trade services was no longer the culprit, suggesting producers are no longer hiking prices to rebuild margins, but services input prices rose broadly and risk aggravating consumer inflation.
• Additionally, the March ISM Manufacturing showed the “prices paid” sub-component registering the largest two-month increase since 2016, first on tariffs, and then war. The ISM Services Prices Paid index rose as well, from 63.0 to 70.7, pushing prices up to the highest level since 2022. Chair Powell indicated the Fed would likely look through an oil shock so long as core inflation remained in check. This is good, because it appears inflation is about to accelerate sharply; the Bloomberg consensus for March headline CPI is now +1.0%, which if realized would be higher than all but two months of Covid-impacted 2022.
• The war will have profound impacts on the economy. It does appear that the US is trying to wind down operations with or without control of the Strait of Hormuz, though it is too soon to know if President Trump’s latest “two to three week” timeline will hold. The US is better insulated from the economic impact of restricted oil supply than Europe, as we purchase less oil that flows through Hormuz; this explains the growing spread between Brent and WTI oil futures. Oil producer and refinery income will help cushion some of the economic harm, as well, as we are sizable producers. Long term inflation expectations remain stable; while the front of the curve saw a combination of increased inflation expectations and rising real rates, the increase in the 10Yr UST in March was almost entirely in real rates following changes in Fed Funds expectations.
• A Fed on hold for the foreseeable future is a reasonable base case, though there are now risks to both sides; hikes if energy prices start to pressure service prices and inflation accelerates, and cuts if higher energy prices causes consumer pain and recession risk. We will watch carefully for evidence of either.

Sources: Bloomberg, Bureau of Labor Statistics, Bureau of Economic Analysis, Institute of Supply Management.

Equity News and Notes

A Look At The Markets

• Stocks were down sharply in March as the S&P 500 (-5.1%) and Nasdaq (-4.8%) had their worst months in a year and the DJIA its worst (-5.4%) since late 2022. Each of the major averages ended the month riding 5-week losing streaks, which for the S&P 500 was its longest since May 2022. Losses were broad-based as the equal-weight S&P 500 dropped -6.4%, underperforming its market-cap weighted counterpart for the first time since October 2025. Energy (+10.3%) was the only sector to finish higher on the heels of a +51.3% surge in WTI crude oil.
• Market action was, of course, dominated by the conflict in Iran and the resulting energy shock. WTI crude (US oil) experienced its biggest monthly increase since May 2020, while Brent crude (international oil) spiked +63.3%, the largest monthly increase on record. Headlines drove whipsaw trading with energy-induced inflation fears leading to interest rate volatility and a subsequent loss of investor risk appetite. The hit to sentiment was apparent in multiple compression as the S&P 500’s forward P/E ratio dropped from ~22x to ~20x.
• The correlation between WTI crude and the S&P 500 was -0.83 during March, a strong inverse relationship, as compared to a more muted 5-year average of -0.52. Yet stocks still rallied +2.9% on the final day of March despite WTI moving higher to close over $100/barrel. We feel this stark short-term change in relationship was due to investors beginning to shift their focus from the inflationary impact of oil prices to the potential for demand destruction and other economic headwinds. This was also evident in the Fed Funds’ futures market, which signals odds of future interest rate decisions. Coming into the year, the market was pricing in ~2.5 rate cuts by the end of 2026, providing a tailwind for stocks. This evaporated with the ongoing conflict and resulting inflationary fears, as odds shifted to price in a nearly 80% likelihood of a rate hike. As investor attention moved towards growth concerns, Fed odds reversed course once again to signal ~25% odds of a rate cut by December. We believe the inflation vs. growth dynamic will be in focus as the Middle East conflict plays out and expect the Fed to remain on hold for the time being.
• March’s declines seem relatively orderly when looking back at historical drawdowns. The month’s worst day was -1.7%, which is somewhat benign compared to last April when the S&P 500 suffered daily losses of -4.8%, -6.0%, -3.5%, -2.2%, and -2.4% within 12 trading days. If this is the start of larger losses, it would be unique in terms of the initial drawdown. Over every bear market since 1950, the average time needed it has taken to reach a -5% decline has been 14 days, with the longest period of 24 days in 1970. It took 35 trading days to fall -5% this time around, which we think speaks to investors’ concern about being caught offside by the latest Administration headline, as was the case for many on April 9, 2025 (see below).
• There is no way of knowing when the eventual bottom will occur as there are too many uncertainties related to the conflict in Iran. The ultimate damage to energy and related infrastructure is an open question, as is when will oil shipments will once again be able to freely navigate the Strait, and what the lasting impact on the global economy will be. Market indicators including sentiment, technicals, and internals are signaling that we could be close to a bottom, but there is not yet any indication of an “all-clear.”
• What we do know is how stocks have responded to prior instances of elevated volatility, and the data suggests bulls could once again smile in due course. The VIX closed at 31.1 on March 27th, its highest close since April 2025, and lies in a range that has historically led to strong 6-month forward returns. It is also worth noting that midterm years tend to be more volatile, with a median drawdown of -15.6%. While living through a -15% correction is scary, patience and a long-term focus has historically been rewarded with above-average forward returns.

Sources: Bloomberg, FactSet

From the Trading Desk

Municipal Markets

• Municipal performance experienced a sharp downturn in March as the market contended with the onset of war in Iran and elsewhere in the Middle East, and its implications on the economy and interest rates.
• Municipal yields moved higher in line with or selectively exceeding US Treasuries. All spots on the curve rose, with the strongest impact being felt from 5 to 12-years. The overall sell-off was bell-shaped with tapered moves at the front and long ends, and the largest increase in the belly of the curve.
• Relative to absolute yield moves, 3-year and shorter maturities saw yields push higher by from 37 to 45bps. The 5 to 12-year maturities moved up in a parallel fashion  by 55 to 60bps, while the 15-year spot rose by 48bps. Meanwhile, the long end of the curve (25 to 30-years) finished the month higher in yield by 30bps. 
• Spreads between 2s and 30s flattened by 3bps but effectively saw a twist with a 21bps steepening inside of 10 years (i.e.2s-10s) and 10 to 15-year yields falling by 12bps.
• Municipal ratio moves were equally dramatic with all spots out to and including the 10-year maturity experiencing ratio widening as the municipal selloff exceeded the UST move.  Ratios in the 2- to 3-year part of the curve widened by 3 – 5% while 5 to 10-year maturities saw levels move cheaper by 7-8% relative to USTs. The month closed with 3-year ratios at 65.2%, 5-years at 67.8%, and 10-years at 72.2%.  As we move into April, municipals look quite attractive with 10-year AAA yields above 3% and ratios exceeding 70%.
• According to JP Morgan, March tax-exempt issuance totaled $49B, while total gross issuance reached $52B. Long-term tax-exempt supply set a new March highwater mark, besting the prior record of $45B set in 2007, and closing the month 25% ahead of March 2025’s $39B.
• Municipal funds continued to gather net new subscriptions throughout the month reaching a total of $3.85B (weekly reporting funds only), with over 88% of the flows accounted for by ETFs and the balance open-end funds.
• Weaker seasonal reinvestment anticipated in April should pressure tax-exempt bond market technicals. JPM estimates that net supply should be about $18B during the upcoming month.

Corporate Markets

• The month of March began with the war on Iran tipping the scales towards a risk-off tone causing Investment Grade credit spreads to tighten. That trend was fueled by signs that the conflict would last longer than initially expected and spreads climbed to a YTD high of 93bps OAS on the Bloomberg US Investment Grade Index by mid-month. While the Index ended the month down slightly to 89bps, wider spreads along with a move in rates created a monthly performance loss. The recent move in credit spreads has not been nearly as pronounced as the “Liberation Day” sell off in credit last April, and a little spread widening can be healthy for the market. Despite modest credit pressure in certain sectors, we feel credit spreads will likely remain within near-term averages for the foreseeable future.
• Amid significant volatility and uncertainty, Investment Grade issuers successfully navigated windows of opportunity to issue new debt in March. The $231B that came during the month was the second highest March issuance behind the $259B seen in March of 2020. We also saw one of the largest weeks on record despite higher funding costs and yields on some deals tipping over the 5% mark. Future uncertainty and earnings season should slow down issuance in April, although the YTD total of $636B is on track to reach the $1.85 trillion of new debt expected to hit the market in 2026. We expect new supply to continue to be met with strong buying support.
• UST rate action was the story of the month as yields across the curve moved up in a parallel manner. This erased a long-standing dip at the 2Yr and 3Yr portions of the curve where yields had been sitting well below the 1Yr. The 5Yr benchmark rose 44bps to 3.94%, 10Yr yields reached 4.32%, and the long bond inched closer to 5%. The war in Iran and its accompanying impact on energy production across the region has reignited inflation concerns and prompted speculation that the Federal Reserve could be forced at some point to raise rates instead of cutting them. In our view, rate hikes are unlikely as the Fed remains focused on longer term data, although prospect for near-term cuts has been greatly diminished.

Sources: Bloomberg, Bond Buyer, Barclays, JP Morgan, and Lipper Inc.

Financial Planning Perspectives

Navigating Market Volatility: Staying Grounded When Markets Aren’t

Market volatility can feel unsettling, but it’s important to remember that volatility is a feature, not a bug; In fact, it’s the price investors pay for attractive long-term returns. Historically, markets have delivered strong performance over time, but not without periods of decline along the way.

Market pullbacks are normal. The average intra-year decline is around 14%, and since World War II, markets have experienced frequent drops of 5% or more. While some of those declines deepen into bear markets, history has consistently shown that staying invested—and even buying during downturns—has been rewarded over time.

Stay Disciplined: Avoid Emotional Decisions

• Periods like these often tempt investors to act—but the wrong actions can be costly.
• Don’t panic or make rash decisions
• Don’t try to time the market—it’s time in the market, not timing the market, that drives long-term success
• The market’s best and worst days often occur close together – It’s impossible to catch the good days and miss the bad ones…. And missing just a few strong recovery days can significantly impact long-term returns
• Remember: no matter what is driving volatility, it’s probably not different this time, even if it feels that way
• It always feels worse when you’re in the middle of it—but reacting emotionally can derail even the best financial plan.

Focus on What You Can Control

• Volatility can create opportunity for disciplined investors.
• Rebalance regularly: If your allocation has drifted (e.g., from 65%/35% to 75%/25%), it may be time to rebalance. Doing so is a disciplined way to sell high and buy low.
• Don’t let taxes unilaterally drive your decisions: Trimming winners in good times and paying taxes on those gains is not a bad outcome!
• Consider Roth conversions during downturns: Lower market values can allow you to convert more assets, allowing for assets to grow tax-free in a potential future recovery.

Prepare in Advance: A Strong Plan Is Your Best Defense

The best way to handle volatility is to prepare before it happens.

Have a plan:

• Maintain 3–6 months of cash to meet expenses (or up to 2 years in retirement)
• Ensure your portfolio risk is appropriate to meet long-term goals

Stick to your plan:

• Stay invested according to your strategy; Don’t sell in the heat of the moment
• If you’re in retirement, have a prudent income strategy

Maintain a Long-Term Perspective

Markets are by nature forward-looking—they often begin to recover before economic conditions improve.. Historically, downturns have been temporary, and recoveries have followed.  Even for those in or near retirement, your investment horizon for portions of your assets may be 10+ years out. That’s a long enough timeframe for markets to recover and grow.  And while worst-case scenarios can feel realistic in the moment, it’s worth remembering that history suggests markets will recover.

Above all, have faith in your plan.

If you’re feeling uneasy, that’s understandable, but you don’t have to navigate it alone. Reach out to your Wealth Manager to talk through your strategy and ensure you remain aligned with your long-term goals.

Sources:  Appleton Partners, Inc.

This commentary reflects the opinions of Appleton Partners based on information that we believe to be reliable. It is intended for informational purposes only, and not to suggest any specific performance or results, nor should it be considered investment, financial, tax or other professional advice. It is not an offer or solicitation. Views regarding the economy, securities markets or other specialized areas, like all predictors of future events, cannot be guaranteed to be accurate and may result in economic loss to the investor. While the Adviser believes the outside data sources cited to be credible, it has not independently verified the correctness of any of their inputs or calculations and, therefore, does not warranty the accuracy of any third-party sources or information.  Specific securities identified and described may or may not be held in portfolios managed by the Adviser and do not represent all of the securities purchased, sold, or recommended for advisory clients. The reader should not assume that investments in the securities identified and discussed are, were or will be profitable. Any securities identified were selected for illustrative purposes only, as a vehicle for demonstrating investment analysis and decision making. Investment process, strategies, philosophies, allocations, performance composition, target characteristics and other parameters are current as of the date indicated and are subject to change without prior notice. Registration with the SEC should not be construed as an endorsement or an indicator of investment skill, acumen, or experience. Investments in securities are not insured, protected or guaranteed and may result in loss of income and/or principal.