Your 2026 market volatility playbook 

What you need to know

• Rising tensions in the Middle East and oil supply disruptions raised inflation and growth risks, erasing much of the early market gains this year.
• Longer-term market returns, however, remain strong, despite broad-based losses in March.
• With the duration of the conflict in Iran and oil supply disruptions uncertain, markets will likely remain sensitive to headlines in the near term, but we expect the impact to be temporary.
• More broadly, periodic volatility is normal. Consider this playbook: revisit goals, rebalance strategically, deploy cash systematically, and take advantage of opportunities created by pullbacks.
• Consider a diversified overweight to stocks and underweight to bonds for your portfolio to help navigate the near-term potential for headline-driven volatility amid a broader backdrop that we expect to favor stocks over the next one to three years.

Portfolio tip

Before making any portfolio changes, revisit your comfort with risk, time horizon and financial goals since they drive the design of your portfolio—not headlines. 

Where have we been?

Markets pressured by rising tensions in the Middle East and oil supply disruptions. Equity-market momentum hit the ground running in 2026, supported by steady economic growth, expansionary fiscal policies, and looser monetary conditions, with international and value-style stocks leading early gains.

However, geopolitical tensions rose in March, causing markets to give back much of the year's early gains as investors assessed the potential implications of the conflict in Iran, such as the potential for rising oil prices to drive inflation higher and weigh on economic growth.

Equity-market losses were broad-based last month, though U.S. stocks held up better. All stock asset classes finished lower. Though, U.S. stocks dropped less than international stocks, which are more dependent on oil supply from the Middle Eastern region. The dollar strengthened, demonstrating its safe-haven role, which weighed further on international returns.

Within the U.S., however, tech stocks remain among the hardest hit this year, reflecting investor caution over their valuations and capital spending. After leading markets in recent years, they've meaningfully underperformed most other sectors in 2026, causing U.S. large-cap stocks to lag all asset classes. Meanwhile, the energy sector rallied in March, benefiting from the spike in oil prices, helping to cushion losses elsewhere in well-diversified portfolios.

Bonds helped dampen equity volatility in well-diversified portfolios. Interest rates rose as concerns about energy supply disruptions raised questions about inflation and central bank policies, pressuring bond prices. Expectations grew that some central banks, such as the Bank of England and European Central Bank, may combat higher inflation with rate hikes in 2026, and that the Federal Reserve may delay additional rate cuts.

Steady interest income and contained credit spreads provided support for bond allocations, limiting the impact of falling prices on bond returns. As a result, despite their softness in March, bonds outperformed stocks, providing a buffer against equity volatility.

Zooming out, longer-term market returns remain strong, despite recent volatility. Propelled by global economic resilience, technological innovation, and rate cuts from several major central banks, average annual returns across U.S. and international stock markets over the past one- and three-year periods have been robust. Average annual returns across stock asset classes range from 13% to 19% over three years, even after the March pullback.

Bonds have also boosted well-diversified portfolios as investors benefited from ongoing interest income, with tighter credit spreads helping higher-yielding bonds outperform those of higher quality.

What do we recommend going forward?

While the duration and scale of the conflict in Iran and energy supply disruptions remain key uncertainties, we expect the drag on growth and the uptick in inflation to be modest and temporary. Markets may remain sensitive to headlines for a while longer, but the impacts of geopolitical events tend to be short-lived.

Even beyond this year's events, periodic volatility is normal. The S&P 500 index, for example, tends to experience a correction of 10% or more about once a year on average, something we did not see through the first quarter of 2026. And while market fluctuations are expected, perfectly timing the highs and lows with consistency is impossible. Attempting to do so may risk missing some of the strongest days in markets.

Amid the ongoing potential for periodic market volatility, consider talking through this playbook with your financial advisor:

1. Evaluate any changes to your goals or your time to achieve them. While headlines and markets shift constantly, your investment strategy should remain guided by your comfort with risk, time horizon and financial goals—such as saving for retirement, education, or a legacy.
   
   Before making any portfolio changes, revisit these core factors. Doing so can help determine the appropriate balance between stocks and bonds for your strategy, and our strategic asset allocation guidance can add resilience to your approach. Unless your circumstances have changed, you may find your existing strategy has already helped prepare you to navigate market volatility in alignment with your risk and return objectives.
    
2. Rebalance your portfolio, ensuring you have enough cash, but not too much. Having enough cash to cover spending needs and emergencies helps prevent the need to sell longer‑term investments during a market downturn, giving stocks time to recover.
   
   But having too much cash comes with opportunity costs by limiting long-term return potential. For money intended for a longer-term goal, we recommend limiting cash to no more than 5% of your portfolio. Consider putting overweight cash positions to work by rebalancing toward asset classes that have become too underweight in your portfolio, relative to your strategic targets.
    
3. Consider a systematic investing strategy . Feeling hesitant to jump into the market all at once? Making regular, planned contributions to your portfolio over time can help you deploy cash in stages, remove emotions from investing decisions, and keep a disciplined focus on your goals. Systematic investing does not guarantee a profit or protect against loss. The strategy involves continual investment in securities regardless of fluctuating price levels. Consider your financial ability to continue the program when share prices are low. 
   
   Systematic investing strategies can also help ensure your portfolio stays within your intended targets over time by providing natural opportunities to rebalance, enhance diversification and/or add quality investments at lower prices during market downturns.
    
4. Consider whether the down market created tax-loss harvesting opportunities . Selling an investment at a loss can help offset capital gains that may occur throughout the year, and market declines may allow you to realize larger losses than would otherwise be possible. If losses exceed gains in any given year, the excess can be carried forward to help offset gains in future years.
   
   When reinvesting the proceeds from selling an investment to capture a loss, be mindful of the wash-sale rule. Also consider directing the proceeds toward areas that have become too underweight, helping to maintain your strategic allocations while potentially minimizing additional taxes or transaction costs that could have otherwise been associated with rebalancing.
    
5. Consider tilting toward attractive investment opportunities created by pullbacks. Over our one- to three-year outlook horizon, we believe the broader economic environment continues to favor stocks over bonds, particularly given our expectation for geopolitical tensions to de-escalate over time. What's more, lower stock valuations, following the pullback, help to improve forward return potential.
   
   We suggest overweighting a diversified mix of stocks and underweighting a diversified mix of bonds, relative to your strategic asset class targets, to help you navigate the near-term potential for headline-driven volatility amid the year's supportive backdrop more broadly.
   
   Within the U.S., we favor a mix of quality and cyclical stocks—namely, U.S. large- and mid-cap stocks, as well as the consumer discretionary and industrials sectors—given solid corporate profits, modest fiscal support, AI-related spending, and the relative strength of the U.S. economy.
   
   Internationally, we favor more cyclical asset classes for their relatively attractive valuations, particularly when compared to international large-cap stocks, which we recommend underweighting. We believe international stocks could benefit from the potential for a flat-to-weaker U.S. dollar as geopolitical tensions ease, fiscal support and for tech-heavy emerging markets, from AI-driven growth.

We’re here for you

Abandoning a well-built plan during market volatility could place your financial goals at risk. Talk with your financial advisor about the preparations you've built into your plan and whether any actions are necessary to enhance the resilience of your strategy or timely positioning of your portfolio.

If you don't have a plan in place, or a financial advisor to talk with, we invite you to meet with an Edward Jones financial advisor to build a strategy around your comfort with risk, time horizon and financial goals, and discuss options that may help you take advantage of opportunities created by the recent pullback.

Strategic portfolio guidance

Defining your strategic investment allocations helps keep your portfolio aligned with your risk and return objectives, and we recommend taking a diversified approach. Our long-term strategic asset allocation guidance represents our view of balanced diversification for the fixed-income and equity portions of a well-diversified portfolio, based on our outlook for the economy and markets over the next 30 years. The exact weightings (neutral weights) to each asset class will depend on the broad allocation to equity and fixed-income investments that most closely aligns with your comfort with risk and financial goals.

Diversification does not ensure a profit or protect against loss in a declining market.

Opportunistic portfolio guidance

Our opportunistic portfolio guidance represents our timely investment advice based on current market conditions and a shorter-term outlook. We believe incorporating this guidance into a well-diversified portfolio may enhance your potential for greater returns without taking on unintentional risks, helping keep your portfolio aligned with your risk and return objectives. We recommend first considering our opportunistic asset allocation guidance to capture opportunities across asset classes. We then recommend considering opportunistic equity style, U.S. equity sector and U.S. investment-grade bond guidance for more supplemental portfolio positioning, if appropriate.