Commentary

First Quarter 2026 Quarterly Market Update

Fidelity's Asset Allocation Research Team (AART) examines themes in global financial markets and presents its investment outlook in this Q1 2026 quarterly market update.

By: Fidelity Asset Allocation Research Team

Updated: 1/22/2026

Key Takeaways

Markets: Markets rallied on the back of Fed rate cuts, earnings growth, and ongoing AI-driven investment momentum, though elevated valuations and lingering policy risks underscore the need for diversification in non-US assets.
Economy: The global economy continued its uneven but ongoing expansion, with the U.S. showing solid mid-cycle growth despite inflation remaining persistently above target and pockets of labor and housing weakness.
Investments: Most major asset classes delivered positive returns, led by international equities, gold, and U.S. value stocks. Fixed income benefited from lower yields despite historically tight credit spreads.
Valuations: Asset valuations remain elevated, particularly in U.S. equities and AI-linked sectors, making non-U.S. markets and diversified, income-oriented fixed income relatively more attractive heading into 2026.

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First quarter 2026 quarterly market update

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