by David Young, President
The first quarter of 2026 was one for the books, and not in the way anyone hoped.
A war in Iran. Oil prices soaring to historic levels. Shipping through the Strait of Hormuz nearly coming to a halt. Stocks dropping across every major market. Bond yields increasing. Headlines scream that the world is falling apart.
And yet, for investors who stayed the course, the damage was much more manageable than the noise indicated.
The S&P 500 ended Q1 down 4.6%, marking its worst quarter since Q3 2022 and its poorest start to a year since 2022. A strong rally late in March on Tuesday was the only thing that kept this from being the worst Q1 since the pandemic. Growth stocks suffered the most, with the Russell 1000 Growth dropping nearly 10%. The Nasdaq, Russell 2000, and Dow all saw corrections of at least 10% at some point during the quarter.
That’s the headline. Here’s the rest of the story.
MARCH MADNESS
The Iran conflict escalated sharply in March, sending shockwaves far beyond the Middle East. What started as a logistics disruption turned into a full-scale supply shock, marking the largest energy supply disruption in recorded history. WTI crude futures surged nearly 49% during the quarter, with spot prices rising over 76%. The GSCI commodity index posted its second-best quarter on record, behind only the start of Gulf War I in 1990.
Almost everything else went down. The S&P 500 dropped 4.9% in March alone, while the Dow decreased 5.2%. Foreign markets fared worse, with developed international stocks falling 7.8% and emerging markets dropping 9.3%.
But here’s what I want you to notice: markets held up relatively well through a quarter that included U.S. military action in Venezuela, the Iran conflict, a global energy shock, a selloff in the software sector, and shifting interest rate expectations — all at once. The S&P 500 is still up significantly over the trailing twelve months. Corporate earnings have remained strong. In fact, since the Iran conflict began, earnings estimates for every single S&P 500 sector have increased.
Bottom line…The world is uncertain but the economy is not broken.
BENEATH THE SURFACE
Here’s something worth understanding, because it tells you a lot about where the opportunity lies.
In 2025, the S&P 500 gained 18%. But behind that headline, 72% of individual stocks dropped at least 10% at some point during the year. This year, the pattern continues: 40% of stocks have already experienced intra-quarter drawdowns of 10% or more.
Index returns can be quite misleading. However, there’s another side to this: in this quarter, over 56% of S&P 500 stocks actually outperformed the index, marking the second-highest level in fifteen years. The 63-day correlation between individual stocks and the index stands at just 0.32, roughly 1.5 standard deviations below its long-term average. Not to get too technical, but the 126-day correlation has dropped near its lowest level since 1972.
In simple terms: stocks are behaving more independently of each other than they have in decades. That creates the perfect environment where active management, careful stock selection, and tax-loss harvesting strategies deliver real, measurable value. We are closely monitoring every one of those opportunities.
FIXED INCOME: THE OPPORTUNITY IN THE CHAOS
Bond yields have increased sharply, and for income-focused investors, that’s not entirely bad news.
Short-term yields (2–5 years) are now higher than the Fed funds rate for the first time in three years, making this part of the bond market genuinely attractive. We’re also monitoring inflation-protected securities closely, as energy-driven inflation pressures could last longer than markets expect.
Is a further equity correction possible? Yes. But history makes it clear: investors who try to time their way out of corrections miss the recoveries that follow. Since 1928, the S&P 500 has been positive over one-year periods 75% of the time and over ten-year periods 95% of the time. The odds favor patience… they always have.
WHAT WE’RE WATCHING
The Iran conflict remains unresolved, and its duration is uncertain. The main factors are how long the energy disruption lasts, whether stagflationary pressures develop if oil prices stay high, and how central banks react to a world where growth slows while inflation rises. These are genuine risks, and our investment approach considers them.
At the same time, sentiment indicators have reached levels of extreme pessimism that have historically signaled recoveries rather than further declines. We’re not calling a bottom, and anyone claiming they can is sharing what they hope for rather than what they actually know. However, the data indicates that fear has moved well ahead of the fundamentals.
FULL SPEED AHEAD AT PARAGON
I want to step back from the markets for a moment and give you an update on Paragon.
As you know, my term as mayor ended earlier this year. I am fully back at Paragon—not halfway, not transitioning, but completely and energetically back. And I have to tell you: I am very excited about where we are as a firm and where we are headed.
Paragon performed well while I served the city; our team kept every client account proactively managed and maintained high standards. That foundation is solid. But solid isn’t the end goal. We are now in active growth mode, which means refining our investment process, upgrading our planning capabilities, sharpening our communication, and building systems designed to serve you at the highest level possible. Good things are happening here, and the best is yet to come.
Paragon has never been solely transactional. Many of you have been with us for decades. I know your families, your goals, and what keeps you awake at night, and I take that trust seriously. Your loyalty hasn’t gone unnoticed. Now, I want to show my appreciation and take our services to a new level.
IN CONCLUSION
Every quarter presents challenges that tempt investors to abandon their plans. Yet, sticking with your plan is how we help you reach your long-term goals. Those who stay committed through minor and major bear markets have seen their accounts grow by 1724%, or 17 times their original value, over the past 28 years with Top Flight. This quarter, the obstacles included war, oil shocks, and a sharp market pullback. Next quarter, it will be something else. It always is.
The investors who build real wealth over time are NOT the ones who react fastest to the headlines. They are the ones who stay invested, stay disciplined, and trust the process, especially when it’s uncomfortable. That is what we do at Paragon. That is what we have always done.
If you have questions about your portfolio, concerns about what you’re seeing in the news, or simply want to talk through where things stand, reach out. We are here, we are watching, and we are working for you.