The Rice Partnership Market Update April 2026


The Rice Partnership’s Chief Investment Officer, Orest Saikevych, and Portfolio Manager, Brian Tokuuke discuss first quarter market events.

ECONOMIC AND MARKET REVIEW AND OUTLOOK, April 2026

“You have one tool, it can’t do two things at once.”

– Jerome Powell, Current Federal Reserve Chair

First Quarter Summary

As predicted, 2026 is turning out to be another volatile year, with most markets falling in the first quarter.

  • Following a turbulent March, the S&P 500 declined 4.3% while the NASDAQ 100 fell 5.8%. Bond yields crept higher, with the 10-year Treasury yield rising from 4.17% to 4.32%.
  • After remaining higher for most of the period, International markets dipped 1.1%.
  • Commodities continued their wild ways. WTI oil was up a stunning 76% while Brent almost doubled. Gold rose 8.1% after selling off sharply in March.

Early Developments

After the capture of Venezuelan leader Maduro, tensions rose between US and Denmark over the future status of Greenland. The White House insisted on purchasing the territory while Copenhagen remained firm in its resolve to maintain control over the world’s largest island. While the situation is largely unresolved, both sides have agreed to negotiate a solution.

The AI situation has morphed from elevated capital expenditure worries by hyperscale companies like Oracle to entire industries (such as software) being severely disrupted. This argument is somewhat contradictory as both concerns cannot be true. In other words, if business models of industries are at risk, then the capex spending is showing results. This is indicative of a phenomenon in its early, rather than late stages.

Meanwhile, the future composition of the Federal Reserve Board remains undecided. With Chairman Powell’s term expiring May 15th, the President has nominated Kevin Warsh, a former Fed governor, as the new Chair. However, Mr. Warsh has yet to be confirmed by the Senate and several Senators are threatening to hold up the vote until a criminal investigation of Chair Powell is completed. To complicate matters further, Powell will remain as a Fed Governor even if his term ends and he has not indicated if he intends to stay. Additionally, the status of Governor Lisa Cook is still in the courts.

All of this will make it more difficult for the FOMC to reach consensus on interest rate policy, even though Warsh is leaning towards lowering the short-term Fed Funds rate. Although the Chair has the most influential vote on the Board, it still requires a majority vote to determine direction of monetary policy.

With these events occurring simultaneously, it appears the tariff dilemma has been placed on the back burner. In late February, the Supreme Court (SCOTUS) struck down nearly half of the Administration’s tariffs, prompting a temporary imposition of 10% tariffs with the option of an increase to 15%. Also, tariffs on specific industries such as steel, aluminum and autos were increased. The temporary levies will last until the end of July, at which time congressional action will be necessary for a more permanent solution.

Conflict in Iran

At the end of February, the US and Israel launched an aerial and naval bombardment of suspected Iranian nuclear facilities. The Administration’s stated goal of permanently disabling Iran’s nuclear program was amended to include the achievement of regime change. Tehran responded by drone and missile strikes against American military bases in the Persian Gulf, along with military and energy infrastructure in neighboring countries and Israeli military and civilian targets.

The situation escalated as liquified natural gas (LNG) plants in both Iran and Qatar were severely damaged. Additionally, supplies of oil going through the Strait of Hormuz (SOH) were effectively cut, with only ships friendly to the Iranian regime allowed to transit. In effect, about 20% of global oil and natural gas supply has been cut off.

The current state is extremely fluid, centering around a two-week ceasefire and reopening of the SOH. Negotiations on April 11th failed and the US has since launched a total blockade of the Strait. Although path forward is unclear, it is imperative that traffic through the SOH must be entirely restored to prevent the global economy from getting worse.

Beyond that, sticky issues such as Iranian nuclear enrichment and Israeli strikes against the Hezbollah in Lebanon remain to be decided. Regarding the global energy situation, the US is now a net energy exporter due to the advances in fracking technology. Countries in Asia and Europe unfortunately, are net energy importers continuing to be hurt by the supply shock.

The Outlook for the Second Quarter

TRP anticipated some of the current market volatility by adding energy stocks to portfolios early during the first quarter and adjusting international holdings to reflect longer term impact of higher energy prices. Here is the outlook for the next quarter.

  • With energy prices likely to remain elevated for now, US inflation will climb higher, between 3.0-3.5%. Real GDP (inflation adjusted) growth may be clipped between 1.5-2.0%, although refunds from the new tax bill should offset the hit from higher gasoline prices to consumers.
  • There is an outside chance (30%) of a US recession at worst, because the United States is a net exporter of energy. For a recession to occur, however, it would still take significantly higher energy prices with West Texas Intermediate (WTI) contracts sustaining levels of over $140 per barrel for several weeks. Currently, WTI is at $92.
  • The employment picture will remain largely unchanged, with the “no hire, no fire” situation continuing.
  • The Fed is likely to keep short-term Fed Funds rate steady until the Iranian conflict is resolved, which may take several weeks. We still see the probability of rate cuts, but recent events have pushed out the timetable until late in the year. Longer dated Treasury yields could creep higher due to inflation and US fiscal concerns.
  • US equities should recover from their recent swoon, with corporate profits slated to rise in the low teens, continuing healthy growth. Volatility, however, could prevail the rest of the year.
  • Keep in mind that mid-term election years usually cause more market volatility than non-election years. As the British used to say during World War II, “Keep calm and carry on.”

ECONOMIC AND MARKET REVIEW AND OUTLOOK, January 2026

“Someone will always be getting richer than you. This is not a tragedy.”

– Charlie Munger, longtime partner of Warren Buffett

Fourth Quarter Summary

During the fourth quarter, financial markets exhibited volatile and uneven progress as the autumn months approached.

  • Both U.S. and global equities showed positive returns, featuring previously laggard groups like cyclicals and smaller cap indices.
  • Fixed income again had modest returns, with little change from 10-year Treasury yields. Meanwhile, the 2- to 10-year yield curve steepened.
  • Commodities became quite mercurial, WTI oil continued lower. Metals soared, with silver having a parabolic blow-off late in December, partly due to limited liquidity.

Overall, markets continued the volatility that characterized 2025 as a whole. It was a rocky but highly profitable year for most investors.

The Government Shutdown and Tariffs

A key theme of the quarter was the unprecedented 43-day government shutdown. The economic cost due to layoffs and other factors led to fears of a hit to real GDP growth. Contributing to the concern was the delay of critical economic reports, leaving policy makers in the dark about the state of the economy. It was not until December that the full economic picture emerged showing little change from September statistics. Employment continued in a “no hire, no fire” environment while inflation seemed to be trending lower.

Revenues from tariffs helped lower the nation’s trade deficit considerably, though their status is being tested before the U.S. Supreme Court (SCOTUS). An adverse ruling could affect $133 billion out of approximately $271 billion in total tariff revenues. The Administration has already stated it has a “Plan B” to replace most of the lost funds, although implementation of the plan may take time.

Geopolitical Considerations

Global tensions simmered last year, with no major changes in the Ukraine-Russia war and Taiwan-China controversy. However, as 2026 dawns, new hot spots are appearing.

The U.S. captured and extradited Venezuelan leader Nicolas Maduro and his spouse in a daring military mission. The new acting President, Delcy Rodriguez, has agreed (with some reservations) to facilitate increased oil production and export to American refineries. President Trump is encouraging major U.S. oil companies to invest massively to upgrade Venezuela’s crumbling energy infrastructure. So far, however, the majors have been cautious, based on previous nationalizations of foreign oil assets by Caracas.

Iran is another hot spot as massive protests currently threaten the Islamic regime. There is a binary outcome scenario for oil, with one possibility a lifting of sanctions and a release of additional barrels. Another possibility would be a supply interruption and petroleum price increases. There are other repercussions, as both Russia and China are allies of Tehran.

More Fog with the Future of the Fed

Another “known unknown” is the future composition of the Federal Reserve Board. Officials at the White House have stated that a new Fed leader will be nominated by the end of January — one who likely favors lower short-term Fed Funds rates. There is also a Department of Justice investigation of Jerome Powell, which could have an impact if he stays on as a Fed governor when his term ends in May.

Still at issue is the status of Fed governor Lisa Cook, currently pending a decision by SCOTUS. If she is removed, observers believe her replacement will probably have a bias towards cutting rates. The future Fed Board members then, may likely reflect that bias.

There is also a push by the Administration to address elevated housing and credit costs through new policies. The details, however, are hazy at this time.

Current Status of the AI Trade

It appears that the market is beginning to differentiate Artificial Intelligence-related stocks as individual winners and losers, rather than as a group based on the latest headlines or sentiment. Winners appear to be companies spending funds out of current cash flow and earnings, while losers are firms that must borrow massively to finance their new technology. Other losers include areas such as software whose legacy businesses deemed to be at risk by AI.

Also, there is increasing evidence of AI usage by corporations, both internal and external. The AI phenomenon is now entering a new phase of development, rather than approaching its end. Of course, we are continuing to monitor red flags of the AI story that were highlighted in our October commentary. Fortunately, they are not present at this time.

The New Year Outlook

  • The U.S. economy should accelerate in the first half of 2026, with the benefits of the new tax bill along with anticipated tax rebates stoking GDP growth.
  • The jobs market continues to erode slowly, though layoffs will not swell meaningfully enough to threaten economic expansion.
  • Inflation may moderate a bit early in the year due to distortions from the government shutdown but should begin to creep higher again later in 2026. Tariff impacts should largely be worked off by spring.
  • The Fed will cut the short-term Fed Funds rate at least two to three times, probably later in the year.
  • The 10-year Treasury bond yield should remain within the 4.00-4.50% range, creeping higher if inflation starts to increase.
  • U.S. stocks should do well, possibly posting another year of above-average returns due to the stimulatory effects of the tax bill, lower Fed Funds rates and the AI story.
  • Volatility will continue, with more headline risk out of Washington and geopolitical hot spots contributing to rapid moves in both directions. Additionally, mid-term election years (such as this one) tend to be more volatile than other years. Patience is required.