Recent market data reveals a surprising historical pattern that may provide comfort to investors navigating current volatility. Since **1990, when the VIX has landed in the 28.7–33.5 range — right where it closed last week — the S&P 500's average forward 6-month return has been 9.5%. This represents nearly double the roughly 5% average return seen during calm, low-volatility periods when the VIX sits below 15. The periods that feel the most dangerous have historically been among the most rewarding for investors willing to stay the course. This counterintuitive relationship suggests that elevated fear levels often coincide with prices that already reflect significant negative sentiment, creating opportunities for sharp recoveries when some anxiety fades.
The S&P 500 experienced its worst month since September 2022, declining 5% for the month as of latest data, marking its worst performance since March 2025. Jack Manley, global market strategist at JPMorgan Asset Management, warns that markets are poised to be "extremely sensitive to headlines, both positive and negative" in 2026. Despite the challenging conditions, Manley emphasizes that "now is still a good time to be taking risk, but realize it is going to be a choppy, bumpy ride over the course of this year." The S&P 500 shed 4.6% in Q1 2026, marking its worst quarterly performance since the third quarter of 2022 when it plunged 5.3%. However, year-to-date 2026 returns show U.S. large-cap stocks down 4.33% while international stocks, small cap stocks and emerging market stocks outperformed, with U.S. small cap stocks up 0.89% and emerging markets stocks down only 0.10%. Small caps (Russell 2000 Index) and mid caps (Russell Midcap Index) both lost 5.0% and 5.3% respectively during March, while international equities fared even worse with developed markets (MSCI EAFE Index) down 10.3% and emerging markets (MSCI EM Index) declining 13.1%, wiping out their year-to-date gains.
The S&P 500's decline was driven by multiple factors including geopolitical tensions, energy market pressures, and technological disruption concerns, with crude oil surging over 51.3% during the month, its largest monthly rise in decades, breaking decisively above $100 per barrel as the Iran conflict disrupted global energy markets. Recent headlines about the conflict in Iran have prompted substantial market losses and gains in the past week, with the stock market rallying on Tuesday inspired by hopes for an end to the Iran war. Oil spiked 20% in two days recently, which has only happened five times previously; on average, markets have been a whopping 24% higher one year later. Energy emerged as the sole bright spot in March, gaining over 10% and is now up 38.2% for the year, while Industrials and Healthcare were the hardest hit with both losing over 8%. Every other sector lost ground, with IT, Consumer Discretionary, and Financials all losing over 9% year-to-date, creating a 45 percentage-points difference between their YTD returns and the Energy sector's YTD return. International markets were hit by both a stronger US dollar and heavy exposure to energy supplies being disrupted by the US-Iran War, with Asian and European countries facing possible recessionary conditions if oil and gas markets don't normalize by early summer.
JPMorgan Asset Management data shows that investors who stay fully invested stand to earn the best returns, with the firm's analysis of S&P 500 data revealing that six of the market's 10 best days happened within two weeks of its 10 worst days. Brian Schmehil, certified financial planner and managing director at The Mather Group, recommends maintaining a diversified portfolio with exposure to international, fixed-income, and other categories like real estate or real assets that are uncorrelated to market returns. Sameer Samana from Wells Fargo Investment Institute sees opportunities in tech and financials at more reasonable valuations, noting that large caps are the closest thing to a "safe haven" in the current market. R360, a group for ultra-high net worth investors with more than $100 million in assets, is currently holding up to 30% in cash and short-duration debt. Creative Planning reports that there are now more 401(k) accounts worth $1 million or more than ever before — twice as many as there were three years ago — highlighting the importance of consistent, long-term investment strategies. Clearstead's approach focuses on ensuring asset allocation is reflective of goals while using market volatility as an opportunity to rebalance back to long-term targets, maintaining a cautious stance until geopolitical outlook becomes clearer.
To better weather the volatility, it helps to stay diversified and have a plan according to financial experts. Schmehil advises maintaining enough cash to provide for short-term goals and a "good game plan" for long-term investments. By rebalancing regularly and understanding your personal risk tolerance, investors have a better chance of staying the course rather than bailing when portfolio balance or emotions reach uncomfortable levels. R360 founder Charlie Garcia forecasts a conflict with Iran and is now seeing potential for a deeper correction, advising members to invest in Canadian Natural Resources, Exxon Mobil, Chevron, Cheniere Energy and the State Street SPDR S&P Oil & Gas Exploration & Production ETF (XOP). Christopher Keller of Fifth Third Bank reports clients were split on allocations, with many buying the dips on S&P 500 equal weight, small caps and international index funds in early March. Creative Planning emphasizes the importance of owning the entire market rather than trying to pick individual winners, noting that corporate earnings have been revised higher by 3.6% since the Iran conflict commenced. Clearstead's baseline outlook was that equity markets were poised to grind higher absent a significant negative shock, but the February 28, 2026 US-Israel strikes on Iran, resulting in the death of Supreme Leader Ayatollah Ali Khamenei, introduced significant geopolitical risk premiums across global assets.
