Getting on Base

The first quarter of 2026 handed investors a reminder: allocating according to the status quo is no longer the best or only way to build portfolios. The standard 60/40 portfolio stumbled as U.S. large-cap stocks (as proxied by the S&P 500) fell -4.3% and bonds failed to diversify. In this environment, portfolios that owned diversifying investments like international equity, natural resources, and gold held up far better.

Source: Morningstar U.S. 60-40 Consists of 60% S&P 500 and 40% Bloomberg Barclays Agg Bond Index. Data through March 31, 2026.

Market Perspective

During the quarter, the Iran conflict drove genuine volatility in energy markets. Brent crude spiked to $114 before retreating below $110 as tensions evolved.¹ Meanwhile, the bond market slumped as market participants had to walk back expectations for multiple rate cuts. We believe that inflation is likely to resurface, should the conflict continue.  

What succeeded in this environment? Natural resources rose 19.8%, gold added 7.1%, and international equities limited the damage for investors who diversified outside U.S. large cap. Meanwhile, the stock-bond relationship that underpins most traditional asset allocation models is no longer as reliable as it once was.

Our latest commentary applies an insight from Moneyball to the current investment landscape: the best teams don’t shoot for home runs, they focus on getting on base. In practice, that means resisting the urge to do what everyone else is doing and instead building a roster with the goal of generating consistent returns across different market environments.

In this commentary, we outline the forces that shaped Q1 – the Iran conflict, AI uncertainty, and a fracturing stock-bond relationship – and how we believe portfolios should be positioned heading into the rest of 2026.

Inside the Commentary

• Learn how the Iran conflict, supply-side inflation concerns, and AI uncertainty shaped the macro backdrop in Q1 2026.

• Understand why the 60/40 continued to struggle – and why bonds failed to act as a portfolio ballast when markets needed them most.

• Explore how diversifying strategies such as natural resources, gold, and alternatives can potentially add value even when the standard 60/40 falls short.

A Closer Look

How can some asset classes soar while more traditional portfolios struggle? We see three forces at work:

• The 60/40 Has a Structural Problem. Since inflation resurged in 2022, the stock-bond diversification relationship has become unreliable. In this current moment, the Fed has limited room to ease aggressively without risking a re-acceleration of inflation. Markets are currently pricing in either no rate cuts or potentially even a hike in 2026, after forecasting at least two cuts just a month ago. In AlphaCore’s portfolios, we have long suggested less exposure to long-maturity taxable bonds, and we believe certain alternative allocations have the potential to diversify during periods of heightened volatility.

• Natural Resources Are Earning Their Place. Commodity-linked companies – energy, metals, agriculture – gained 19.8% in Q1. These assets historically do well when inflation is elevated and the dollar is weakening, especially if commodities like oil are the cause of the inflation. We have had natural resources on our shortlist as a potential portfolio building block for some time, and recent events have reinforced the case.

• AI Remains the Defining Secular Theme – With Greater Uncertainty. Artificial intelligence continues to dominate market narratives, but those market moves are now largely driven by pessimism rather than optimism. In particular, remarkable advancements over the past quarter have created volatility across software and adjacent sectors. We acknowledge that terminal values for many of these businesses are harder to forecast than they were 18 months ago – but we don’t buy the idea that software in aggregate will go away.

Looking Ahead

For the rest of 2026, we’re keeping a close eye on a few key signposts: energy-price pass-throughs in the economic data, the Fed’s ability to navigate inflation without choking growth, the pace of AI monetization, and the continued evolution of the labor market. None of those stories are resolved – but portfolios built for uncertainty don’t need them to be.

Let’s Talk

Reach out to explore how we can help uncover your alpha – or connect with us to discuss these insights further.

[email protected] | 858 875 4100

Commentary Contributors

Eric Gerster, CFA®
Chief Investment Strategist

Johann Lee, CFA®
Director of Research

Dr. David Stubbs
Chief Investment Strategist

Madeline Hume, CFA®
Senior Research Analyst

Sources

[1] Trading Economics. Data as of March 31, 2026.

[2] S&P Global Natural Resources Index

Disclosure:

Past performance is not indicative of future results. This material is being provided for informational purposes only. This material represents the current views and opinions of AlphaCore Capital, and there is no guarantee that any opinions will prove to be accurate, or any forecasts made will come to pass. No obligation is undertaken to update any information, data or material contained herein. It may contain forward-looking statements regarding economic trends, market developments, or other factors. Actual results could differ materially from those expressed or implied. AlphaCore is not recommending the purchase, sale or holding of any security. Information provided does not constitute an offer or solicitation, and should not be considered tax, legal, or accounting advice.

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