The market response to the recent geopolitical developments in Iran has, so far, been relatively muted compared to similar events in the past. That said, these situations often evolve over weeks or months, so continued volatility remains possible.
What stands out this quarter (every quarter) is the clear benefit of diversification.
U.S. small-cap value stocks delivered strong performance, gaining approximately 5% in Q1. In contrast, the widely followed S&P 500 Index declined about 4.3%. This divergence highlights the risk of concentrating solely in large-cap U.S. stocks.
International markets also demonstrated resilience. Both developed and emerging markets were down less than 1% for the quarter.
Stepping back to a broader view, the one-year period from April 1, 2025 through March 31, 2026 tells an even more compelling story:
U.S. stocks: +18%
International developed markets: +23%
Emerging markets: +30%
Given these strong returns, a modest pullback—regardless of geopolitical events—would not be unexpected. More importantly, this reinforces a key principle: investors benefit from maintaining global diversification rather than concentrating heavily in U.S. equities.
Once again, diversification proves its indispensable value.
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Want to really dig in - see our 16 page Q1 Quarterly Market Report Here.