written by Tony DiBartolomeo, DWA Portfolio Manager
Markets faced a volatile start to 2026, but the recent sharp rebound, pushing both the S&P 500 and Nasdaq Composite to new highs, serves as a timely reminder that markets often recover faster than expected.
Despite ongoing global tensions, history shows that markets have consistently absorbed geopolitical shocks. While headlines can drive short-term volatility, recoveries have often followed quickly, something we have seen play out again in recent weeks.
Earlier this year, markets experienced a pullback of roughly 9%. Historically, when drawdowns remain below 15%, markets have typically finished the year positive. The recent move to new highs highlights just how quickly sentiment can shift.
Even with elevated uncertainty earlier in the year, overall volatility has remained relatively contained. Periods marked by more frequent market swings have historically been associated with stronger forward returns, reinforcing that volatility is a normal part of the path higher.
While stocks declined in the first quarter, earnings expectations continued to move higher. A rare but important divergence. Historically, when earnings grow despite short-term market weakness, forward returns have been strong, with average one-year gains of approximately 15%. Fundamentals continue to provide a solid backdrop for equities.
Photo Content Source: Morningstar and Bloomberg as of 3/31/26. U.S. stocks represented by the S&P 500 Index.
Blackrock’s Source: BlackRock Student of the Market April 2026
Looking beyond U.S. mega-cap stocks, a broader set of opportunities is beginning to emerge. International equities have outperformed year to date, and income-oriented and alternative strategies have helped support portfolios in a more balanced return environment.
Bottom Line
The rapid recovery to new highs underscores an important lesson: markets do not wait for clarity. Pullbacks, headlines, and uncertainty are inevitable, but historically they have been short-lived relative to long-term growth.
