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Economy & Markets 

  • Much to the surprise of investors, the S&P 500 is slightly above where it began the year as of mid-April. Given the conflicts in the Middle East and rising energy costs around the world, the sanguine nature of investors is truly remarkable. While gasoline prices at the pump have risen by over $1/per gallon, consumer spending has held up.
  • We certainly hope for the hostilities in the Middle East to end soon, but we caution investors to remain vigilant to market disruptions as global tensions remain heightened. The length of time shipping is impaired through the Strait of Hormuz will ultimately determine the economic impact on the U.S. and global economies.

 Equities

  • The S&P 500 retraced 4.98% in March, as market volatility increased amid the escalating conflict in the Middle East. Energy was the only positive sector, reflecting disruptions in global commodity markets. Both growth and value stocks struggled in tandem, while international equities reversed course and underperformed domestic shares.
  • Fourth quarter earnings and sales for the S&P 500 exceeded expectations and estimates for 2026 continue to trend higher. While stock prices have corrected, valuations now look more reasonable at 19.6x forward earnings. Valuations remain above historical averages but are supported by robust earnings growth expectations of +17% in 2026 and +16% in 2027.

Fixed Income 

  • The yield curve experienced a “bear flattener” this month as short-term rates rose more than long-term rates due to inflation concerns stemming from the conflict in the Middle East.
  • Investment grade credit spreads widened to 90 basis points with the all-in yield reaching 5.15%.

Employment

  • The March unemployment rate fell to 4.3% from 4.4% in February. The economy added 178,000 jobs in March which was a nice rebound from the decline seen in February.
  • Average hourly earnings rose 3.5% over the last year which is very positive especially when considering the rebound in productivity we are seeing.

Federal Reserve 

  • The Fed has a very difficult job ahead as they deal with upward pressure on inflation due to rising energy prices coupled with a sluggish job market.
  • March CPI inflation data showed an annualized rate of 3.3%, while the core rate, which excludes energy prices, rose 2.6%. Both data points illustrate the challenge the Fed is having in its effort to bring down inflation. The Fed’s 2.0% target for inflation has now been exceeded for the last 60 consecutive months.

Issues to Watch

  • Geopolitical risk remains high with a fragile cease-fire between the U.S. & Iran and the Russia/Ukraine war still raging. The vulnerabilities of international energy supplies will continue to be a headwind for global growth.
  • For 2026, we believe the three variables the Fed will be watching closely are economic growth, employment and energy prices. The impact these three variables have on inflation will determine the course of interest rate policy.
Chart of Economic Metrics

1 Data provided by Bloomberg. Metrics are as of month-end or most recent publication
2 Provided by U.S. Real GDP Economic Forecast Survey Median
3 Provided by World Real GDP Economic Forecast Survey Median
4 Provided by Bloomberg Intelligence Forecast
5 Provided by World Probability Forecast
6 Arrows represent a month-over-month change

Chart of Index Returns

Asset Allocation / Tactical Positioning 

Chart of Asset Class

7 Equity tactical weights are relative to the Cambridge Trust Wealth Management Core Equity allocation and is comprised of 80% S&P 500 and 20% MSCI AC World ex-U.S. Index.
8 Fixed Income tactical weights are relative to the Cambridge Trust Wealth Management Core Taxable allocation and is comprised of 100% Barclays Intermediate Gov/Credit Index.
9 Below investment grade holdings include high yield and emerging market debt mutual funds. Represents an out-of-benchmark allocation that will be reflected as an overweight position relative to the Barclays Intermediate Gov/Credit Index if any allocation is held.
10 Alternative tactical weights represent an out-of-benchmark allocation that will be reflected as an overweight position when utilized and neutral position when not.
11 Direction arrow highlights any recent changes of the overall allocation after a recent tactical asset allocation or strategy change. Last changes were made at March 2026 Asset Allocation Committee meeting.

 

 

Views are as of April 2026 and are subject to change based on market conditions and other factors. The opinions expressed herein are those of the author(s), and do not necessarily reflect those of Eastern Bankshares, Inc., Eastern Bank, or any affiliated entities. Views and opinions expressed are current as of the date appearing on this material; all views and opinions herein are subject to change without notice based on market conditions and other factors. These views and opinions should not be construed as a recommendation for any specific security or sector. This material is for your private information, and we are not soliciting any action based on it. The information in this report has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is neither representation nor warranty as to the accuracy of, nor liability for any decisions made based on such information. Past performance does not guarantee future performance.