Monthly Outlook: April 2026
What a wild ride it’s been for markets in March! The U.S. and Israel war with Iran has investors feeling skittish and taking off risk by selling. As proof of the focus being all about the war, consider how markets traded on March 31st, when there were rumors that maybe the war could end soon. On that one day, U.S. stocks bounced about 3% higher. Still, for the month, and even with the bounce on the 31st, most markets were meaningfully down. The S&P500 dropped -4.9%, the NASDAQ100 fell -4.8%, and the international EAFE lost -7.8%. Bonds also lost ground in March over concerns about higher oil prices and potential inflation, falling – 1.7%. The benchmark for a 70%/30% stock/bond portfolio (how typical investors are invested) fell -5.1%. How then, are our managed iFolios only down about -0.5% to -1.5%, YTD? It’s not magic; it’s discipline.
How Do You Drive a Mountain Road?
I often compare managing a portfolio to driving a car. Given the recent market volatility, it’s more appropriate than ever to remind ourselves of the analogy. Successful driving, especially along winding, dangerous mountain roads, requires attention and variable speed. When you’re on a long flat stretch with good visibility, you can hit the gas and make good time. But when you come around a blind curve with low visibility, it’s prudent to reduce your speed, maybe tap the brakes, and avoid trouble. What you don’t do is set your cruise control at 70mph and try to wing it, right? This should seem obvious and logical.
Managing a portfolio is similarly about balancing opportunity for “speed” or growth, with the need to “brake” or to be cautious. When markets are clearly trending higher, we want to be fully invested to maximize returns. But when markets start to trend lower, we want to reduce our “speed,” to reduce our exposure and sell, or at least trim, our holdings to minimize losses. You’d think this was standard practice amongst investment firms, but it isn’t. Instead, it’s common for managers to buy and hold a static 70%/30% stock/bond mix, for example, and hope for the best. But they’re “driving” too slow during the straights, and too fast in the curves. They tend to argue that you can’t predict the markets (the road ahead) and therefore can’t know when to speed or brake, buy or sell. We don’t argue that you can’t accurately predict, because you can’t. But you can drive the road you’re on, and you can invest with the current price trend.
Measuring the Price Trend
Before we discuss price trend, let’s remember that the goal of investing is to buy an asset that will be worth more in the future than the price we paid for it. Investing is simply: fundamental value +/- change in sentiment = price. Some investors carefully study fundamental values, looking at earnings projections, product growth, management capabilities, and so on. They come up with elaborate estimates of “value.” Other investors focus on the sentiment and momentum around the story of a company. Hype can really contribute to a stock’s price, as we’ve recently seen with the “Mag 7” tech stocks.
But why not directly observe changes in the asset price itself? Isn’t that the goal, after all? To oversimplify, we can observe the current price of every asset compared to its 200-day moving average price. If it’s higher, we can say it’s trending higher, and vice versa. We would buy more of the assets that are, in fact, trending higher and would sell assets that are trending lower. Trading the price trend is systematic and fact-based. It doesn’t require any predictions or evaluations about fundamentals or sentiment.
Trending Lower and Current Portfolio Positioning
At Ryan Investments, we use a slightly more complicated version of this price trend-following strategy. Many markets are now trending lower and, like driving through mountain roads, we’ve reduced our “speed” or allocation to avoid trouble. Today, US growth stocks, NASDAQ stocks, international growth stocks, Chinese & Indian stocks, long-term bonds, and bitcoin are trending lower, so we’ve trimmed those. On the other hand, US value stocks, Japanese stocks, short-term bonds, and gold continue to trend higher, so they’re ok to own.
These volatile times require vigilance and a willingness to invest with the price trends as they are, not as we wish them to be. We’ll continue to invest with discipline and “drive” portfolios for growth and protection.