CUSP Wealth – Retail investors who stayed invested during war-driven volatility in Q1 2026 saw a partial recovery following the ceasefire
Retail investors navigated a turbulent first quarter of 2026 marked by a rapid shift from AI-driven optimism to geopolitical shock and a swift ceasefire rebound.
The S&P 500 ended the Q1 period up +1.6%, but the headline figure masks a near 9% drawdown* in March when markets reacted to the outbreak of war on 28 February. Markets recovered quickly following the 8 April ceasefire announcement, highlighting the cost of reactive decision-making during geopolitical events.
War reshaped market leadership
Energy and real-asset sectors dominated as oil surged on supply fears. Energy rose +22.6%, while Financials and Healthcare lagged. Emerging Markets led global returns at +10.7%, despite experiencing the quarter’s deepest drawdown.
Oil/gold dynamic signals lingering economic stress
A sharp oil spike triggered margin calls* across commodity portfolios, forcing investors to sell gold despite its traditional safe-haven role. Oil finished the quarter up +79.6% but failed to recover after the ceasefire; a key signal markets expect ongoing demand weakness.
Ceasefire triggered a broad relief rally
Within six trading days of the ceasefire:
- Nasdaq rose +3.7%
- S&P 500 gained +2.7%
- Emerging Markets rebounded +3.0%
The breadth of the rebound suggests much of the selloff was driven by war-risk premium* rather than deteriorating fundamentals.
Outlook
KEY TAKEAWAY FOR CLIENTS
The headline return of +1.6% understates the journey. Clients who remained invested during the war-phase drawdown participated in the subsequent recovery. Those who reduced exposure during the downturn may not have participated in the subsequent recovery.
At CUSP Wealth, we remain constructive but cautious. Our positioning, diversified across real assets, defensives and growth, is designed to support portfolio resilience during periods of market volatility, consistent with our investment approach. Start investing in a Personalised Portfolio from as low as USD 25*. Personalised Portfolios are advisory investment portfolios built around your risk profile and investment goals.
Disclaimer: Past recovery does not guarantee future outcomes. Investors should consider their individual risk tolerance and investment objectives. *Capital is at risk. Terms and conditions apply. Please review our full Terms and Conditions before investing.
Glossary of terms:
*Drawdown – A drawdown is the percentage fall in a portfolio’s value from its highest point to its lowest point over a given period. A -9.1% drawdown on the S&P 500 means that from its peak in Q1 2026, the index fell 9.1% before beginning to recover. It measures how much pain an investor would have experienced if they held through the decline.
*Margin calls – When investors hold leveraged positions in futures or derivatives, such as oil futures contracts, they are required to maintain a cash deposit (called margin) as collateral against potential losses. When oil prices moved sharply, investors holding positions on the wrong side of that move saw their margin balances fall below the required threshold. They were then forced to either deposit more cash immediately or liquidate other holdings to cover the shortfall. In Q1 2026, this forced selling cascaded into gold. Investors didn’t want to sell gold, but it was their most liquid and most profitable asset, making it the easiest thing to sell quickly. This is why gold fell during the very period it should have been rising as a safe haven.
*War-risk premium – Markets price in uncertainty. When war breaks out, investors demand a higher return to hold risky assets, effectively marking prices down to compensate for the unknown. This extra discount built into asset prices is the war-risk premium. When the ceasefire was announced on 8 April, much of that premium unwound rapidly, which is why equity markets bounced 2–4% within days, not because the economy had improved, but because one specific source of fear had been reduced.
