2nd Quarter 2026 Market Outlook
The uncertainty of war and upward readiness of the market — with the current political landscape, we are determined to maintain our current allocation.
Political Landscape
I want to begin by reiterating what we stated about this last quarter:
“At the start of this administration, President Trump emphasized a focus on ‘Main Street, not Wall Street.’ Many initially interpreted this to mean that he would prioritize middle-class economic well-being even at the expense of market performance. Yet, experience has shown that the President is unwilling to let prolonged market weakness persist.
For example, he initially pressed forward with aggressive tariffs but paused once equity and credit markets began to falter. This pattern is consistent: while his methods are often controversial, his actions demonstrate a willingness to support markets when needed. Examples of this include his talk of wanting to do a ‘DOGE dividend’ earlier this year as well as payments to citizens based on the money saved from the tariffs and the tax cuts from the OBBB. The long-term effects of these policies are hard to understand, but in the short run, President Trump is showing his desire to boost the stock markets and the economy overall.”
Trump has given no indication that his commitment to Main Street has changed.
The other major factor that will affect the market is Trump’s new Fed Chair pick. Typically markets dislike uncertainty, which could be a bearish sign. However, if investors interpret this as an attempt by Trump to stimulate the stock market, sentiment could turn bullish quickly. This dynamic warrants close attention: a dovish Fed Chair nominee could signal lower rates ahead, while a more hawkish pick might dampen near-term enthusiasm.
Technical Analysis
Today (03-31-2026) the markets, specifically the S&P, have had a major bounce. Is this a dead cat bounce, or a true turnaround? From a technical standpoint we could be going up for a retest of the 200MA or simply a gap fill. The biggest technical indicator to be aware of is the bearish cross of the 50MA and the 200MA (the “death cross”). Every major bear market is preceded by this bearish cross, but not every bearish cross precedes a bear market. If things get real bad the S&P could go down to 5,700 or 5,300 for a gap fill. In short, this looks relatively bearish, but there are no guarantees. Furthermore, technical analysis seems to be no match for Trump’s tweets.
Tariff Lessons Learned
April of 2025 was declared by President Trump to be ‘Liberation Day,’ when he initiated sweeping tariffs across the board on other countries. This geopolitical shock sent the markets sinking, dropping double digits from their peak. On April 8th, he reversed course, causing the markets to regain 10% in a single day. From that point on the markets continued upward, ending the year up approximately 17%. Those who missed that single day of 10% returns struggled to achieve double-digit gains for the year.
The lesson learned from those tariffs is that technical analysis does not trump Trump. What we mean by that is: people were not predominantly relying on technicals or fundamentals as much as they were relying on Trump’s words.
In today’s environment, we are approaching a similar moment as we were during the tariff episode — though the circumstances differ in important ways. The markets could continue down, but if our first conclusion is correct — that Trump is focused on Main Street — then he will do all he can to support the markets. Further, the tariff episode showed us just how much sway he truly has over market direction. This means Trump is both able and likely willing to tactically change course temporarily to hold up the markets.
Macro-Economic Trends
In our last edition we discussed that large players in the stock market have fundamentally changed their view of gold and its place in a portfolio. We stated the following:
“These changing perspectives were on full display when the Morgan Stanley CEO recommended shifting from a traditional portfolio with 60% stocks and 40% fixed income to a portfolio with 60% stocks, 20% bonds, and 20% precious metals. As larger players and influential people recommend putting money in gold and silver, it will become a sort of self-fulfilling prophecy, continuing the appreciation of these assets.”
Presently, both gold and silver have had notable pullbacks during Operation Epic Fury — a recent military engagement that triggered risk-off sentiment across commodity markets — however, we see no indication that major players have reversed course concerning precious metals. Nothing goes up forever, and thus this could be seen as a healthy correction rather than a change in sentiment. Additionally, further de-dollarization in the East could prove very bullish for gold prices.
Conclusion
In conclusion, we are unsure what will come in the second quarter of 2026, but due to the above factors, we think the best option is to maintain the current allocation. Our models currently maintain a diversified approach, which has helped us on the downside, but should allow us to take part in any sudden upward momentum.
Bibliography:
Barron’s. (n.d.). Bonds: Market data center: Barron’s. Bonds | Market Data Center | Barron’s. https://www.barrons.com/market-data/bonds?mod=md_subnav
Berk, C. C. (2025, December 10). Fed meeting recap: Fed’s starts stealth easing, Powell rules out hike and Markets Rally. CNBC. https://www.cnbc.com/2025/12/10/fed-meeting-today-live-updates.html
FOMC minutes, January 28-29, 2025. Board of Governors of the Federal Reserve System. (n.d.). https://www.federalreserve.gov/monetarypolicy/fomcminutes20250129.htm
Fed says it will begin treasury bill purchases on Dec. 12. (n.d.). https://www.bloomberg.com/news/articles/2025-12-10/fed-says-it-will-begin-treasury-bill-purchases-on-dec-12
Politico pro: Trump: Fed Chair Pick will be announced early next year. subscriber.politicopro.com. (n.d.). https://subscriber.politicopro.com/article/2025/12/trump-fed-chair-pick-will-be-announced-early-next-year-00672854
Morgan Stanley CIO Favors 60/20/20 portfolio strategy with gold as inflation hedge | Reuters. (n.d.-b). https://www.reuters.com/markets/wealth/morgan-stanley-cio-favors-602020-portfolio-strategy-with-gold-inflation-hedge-2025-09-16/
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