The first quarter of 2026, ending on March 31st, is officially in the record books.
It was rocky, and my portfolio did what it was designed to do: just follow what the stock and bond markets do and ride with the tide. For most of the quarter, my portfolio was up as high as 5.0%, but by the end of March, due to geopolitical conditions in 2026, the returns retreated to a slight loss, less than 1.0%.
For the record, I have experienced booms and busts for the last 25 years, and this current geopolitical stress factor is nothing new. Markets are sensitive to the latest negative economic news, and this one is directly related to oil prices stemming from the war with Iran. When oil prices skyrocket, inflation will eventually show its ugly head. The mere perception among Wall Street minions of inflation as a threat to the stock market, and that’s what happened by the end of the quarter, March 31, when I captured my portfolio and created the following charts.
There are many economic and political factors that wreak havoc on our portfolios and investments, but they should NOT wreck havoc on our emotions! The only factor we can control is our emotions AFTER you have constructed your worldwide diversification across stocks and bonds and an appropriate balance between them. Because I am 78 years old and don’t have much time for my portfolio to recover in case of another prolonged recession or stock market crash, my portfolio is only 40% stocks and 60% bonds.
I inserted the following table of investment returns and asked ChatGPT to provide an analysis and geopolitical and economic commentary.
ChatGPT said:
Q1 2026: When the World Got Noisy, Diversification Did Its Job
My portfolio declined just 0.19% in the first quarter of 2026—a minuscule drop of 19 basis points. On the surface, that may seem unremarkable. In reality, it tells a powerful story about how a properly diversified retirement portfolio behaves when the world becomes unstable.
Because Q1 2026 was anything but stable.
The Backdrop: A Quarter Dominated by Geopolitics and Inflation Fear
Three forces defined the quarter:
1. Geopolitical shock (Middle East conflict)
- Oil surged above $100/barrel as tensions escalated (The Guardian)
- Central banks identified geopolitics—not inflation—as the top global risk (The Economic Times)
2. Stock market volatility
- U.S. markets turned negative for the year, with tech and broad indexes declining (Yahoo Finance)
- Yet corporate earnings remained strong, preventing deeper losses (Reuters)
3. Inflation and interest rate uncertainty
- Rising energy costs fed renewed inflation concerns (KPMG)
- The Fed held rates steady, caught between slowing growth and inflation pressure (CBT News)
This is exactly the kind of environment that exposes weak portfolios—and rewards disciplined ones.
What Happened Inside Your Portfolio
Let’s break your results into what actually mattered:
1. U.S. Stocks Fell (Exactly as Expected)
- VTI: –4.01%
This aligns almost perfectly with the broader market decline. U.S. equities struggled under:
- geopolitical stress
- rising oil prices
- rotation away from growth stocks
There’s nothing “wrong” here. This is normal behavior for equities in uncertain periods.
2. International Stocks Helped Stabilize
- VTIAX: +1.75%
This is a critical point most investors miss.
International markets:
- entered 2026 with better valuations and earnings growth potential (Schwab Brokerage)
- were less concentrated in expensive U.S. tech
Result: they offset U.S. weakness, exactly as diversification intends.
3. Bonds Did Their Job (Quietly)
- VBTLX: +0.05%
- VTABX: –0.45%
Nothing dramatic—but that’s the point.
As uncertainty rose:
- investors moved toward bonds
- yields declined modestly, supporting prices (Thrivent)
Bonds didn’t shoot the lights out. They absorbed shock.
4. Income & Stability Anchors Carried the Portfolio
- VWIA: +0.29%
- TIAA annuity: +5.25%
- Money market: +3.65%
- I-Bonds: +3.40%
This is where your portfolio quietly wins.
While stocks struggled:
- cash equivalents and annuities produced steady returns
- inflation-protected assets (I-Bonds) held up well
This is not luck—this is design.
The Big Picture: Why Your Portfolio Barely Moved
Let’s be blunt:
A 100% stock portfolio would likely be down 4–7% this quarter.
Yours?
–0.19%
That difference comes from three deliberate choices:
1. You accepted that stocks will fall
Not “if”—but when.
2. You owned assets that behave differently
- Stocks (growth)
- Bonds (stability)
- Cash (optionality)
- Inflation protection (real return)
3. You didn’t chase performance
You built a system.
The Lesson for Retired Investors (This Has Been My (Steve’s) Message for Years!)
Q1 2026 is a textbook case that sometimes many retirees struggle to accept:
The goal is not to maximize returns.
The goal is to survive uncertainty without panic.
Because here’s what really matters:
- Markets fell → you stayed stable
- Headlines worsened → your income continued
- Volatility increased → your portfolio barely moved
That’s not underperformance.
That’s financial control.
The Deeper Truth Most Investors Miss
In quarters like this, the temptation is strong:
- “Why do I own bonds?”
- “Why hold cash when stocks recover?”
- “Should I be more aggressive?”
That thinking is exactly what destroys retirement portfolios.
Because the same diversification that:
- feels unnecessary in bull markets
is the same diversification that: - protects you when the world breaks
And in 2026, the world showed cracks:
- war risk
- oil shocks
- inflation uncertainty
- policy instability
Bottom Line
If you want one sentence that captures this quarter, it’s this:
A well-diversified retirement portfolio doesn’t try to win the quarter—it makes sure you don’t lose your future.
Your Q1 result—a near-flat return in a turbulent world—is exactly what a retirement portfolio is supposed to do.
Steve’s BIO
Stephen A. Schullo, Ph.D. (UCLA ’96), taught in the Los Angeles Unified School District (LAUSD) for 24 years and at UCLA Extension, teaching educational technology to student teachers.
Steve wrote investment articles for the United Teachers-Los Angeles (UTLA) union newspaper for 13 years. Thrice featured retirement plan advocate in the Los Angeles Times and U.S. News and World Report. He co-founded an investor self-help group, 403bAware, for his teacher colleagues and has written 7,500 posts in three investment forums since 1997. Frequently quoted by the media, he testified at California State legislative hearings and was honored with UTLA’s “Unsung Hero” award for his retirement planning advocacy.
For the last 20 years, he has served as a volunteer on LAUSD’s Investment Advisory Committee as a “Member-at-Large” and former co-chair. The committee comprises collective bargaining reps from the unions and monitors the district’s tax-deferred retirement plans, 457 (b)/403 (b), for 55,000 former and current LAUSD employees, valued at $3.5 billion in total assets.
