April 8, 2026
By Matthew Vegari, Head of Research
2026 was poised to be another year of strong growth for the US economy. Despite ongoing signs of weakness, not least a labor market producing few, if any, new jobs, the economy was slated to hang on. By the end of last year, the Fed had slashed its policy rate to or near neutral territory; tariff price pressures were rolling over (and with them, inflation); the consumer remained resilient if disgruntled; long rates had fallen; the AI boom was on firm footing.
And yet. As the military campaign against Iran unfolds, high oil prices threaten this late-stage cycle to the greatest degree in years. The specter of higher inflation, propelled by an energy shock, has rattled markets. Portfolios endured a rough Q1, as stocks and fixed income repriced for lower profitability and higher rates. In this market brief, the first of its kind, we leverage Clearwater’s proprietary database and take a detailed look at returns year-to-date to see what’s dragging performance for private wealth investors and nonprofits.
Equity markets have seen a rocky 2026, dragged by consumer stocks (implicated by the energy shock) and technology stocks (implicated, in part, by a higher outlook for interest rates). This has had negative ramifications for private wealth investors in Clearwater’s database, which includes family offices, trusts, and ultra-high net worth individuals. Notably, this year’s YTD performance [-0.71%, on average] mirrors last year’s, when a bevy of new tariffs announcement from the White House pummeled equities before a walk-back allowed the market to recover.
Nonprofits, which include foundations and pensions, have not fared much better [0.04%, on average]. The dip for portfolios has been less severe, a function of smaller allocations to equities.
Equities don’t tell the whole story, however. The Research Desk is now able to decompose returns on an asset-class basis, an exercise which shows an obvious pain point for investors: Both stocks and bonds have taken an acute hit as oil has surged.
In an energy shock there are few winners, as markets price for more inflation and higher rates. At present, portfolios are extremely sensitive to the timeline and outcome of the military campaign against Iran. It’s notable, however, that private credit has actually been a source of strength this year, despite the barrage of negative headlines. These are lower-volatility, higher-yielding, and more illiquid investments that have conferred steady gains to portfolios.
Below we show the typical portfolio breakdown for private wealth investors in Clearwater’s database. The lion’s share is comprised of equities, followed by fixed income, alternatives (mostly private credit), and cash.
We hesitate to show allocations for nonprofits, as we are aware that some entities do not report their entire books on Clearwater’s system. These “offline” assets are largely limited partnerships that comprise a nontrivial share of institutional portfolios. (Note: their inclusion would not have substantially altered our above calculations of total returns; these investments are not regularly priced, and thus would have been excluded from our exercise.)
We’ve long been optimists about the economy’s outlook at the Research Desk. Last June, despite a barrage of recession calls in the wake of Liberation Day tariffs, we called this “the economy that wants to hang on.” In December, we doubled down on that thesis.
Today is a different story. At present, a pipeline of inflation threatens the economy in a meaningful way. Not through shifting monetary policy or long rates (though they don’t help!) but household consumption, which comprises 2/3 of US GDP. With job growth nonexistent, the primary source of resilient consumer spending for several years has been real wage growth. Though inflation has been high, raises received by workers have, on balance, been higher. This increase in purchasing power has been a boon for the economy.
We’re keeping a very close eye on how long the conflict in the Middle East looks to last. At present market pricing, the energy shock could gradually add ~100bps of inflation. That would stall out real wage growth for the consumer and put the economy on very shaky ground. (We published an op-ed on this last week.)
The longer the conflict lasts, the likelier a recession. This economy has wanted to hang on. It may finally let go.
Additional research by Tyler Busby, Data Scientist
Timely analysis of movements observed in Clearwater’s proprietary database and indices, exploring monetary policy, credit conditions, foreign exchange, equities, alternative assets, and more.
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