INSIGHTS

April 28, 2026

Q & Amy

Edition 20

Angus: What are the biggest risks to the market over the next 6 to 12 months?

Amy: Investors continually balance a series of risks and rewards when managing portfolios. Over the last three decades, we have experienced multiple wars, financial meltdowns, natural disasters, and a worldwide pandemic. It’s easy to get caught up in fear-based panic given recent volatility. Questioning whether markets can grow during times of crisis is normal. The term “climbing the wall of worry” was coined to describe a market that continually climbs higher while overcoming various obstacles.

Amy Bush, CFA

Chief Investment Officer

C. Angus Schaal, CFP^®

Senior Managing Director

Our objective remains the same through every crisis: to own stakes in companies with durable business models at reasonable valuations. Stay invested, stay disciplined, and focus on the long term, accepting that short-term volatility is inevitable.

Currently, the prominent risks to markets are the Iran war, fluid US policy, and energy prices. The S&P 500 has risen to new highs, rebounding nearly 13% off March lows in anticipation of a near-term resolution. Yet, the longer energy prices stay elevated, the more detrimental it is to economic growth, especially outside the US.

Angus: Kevin Warsh will likely be confirmed as the new Fed Chief, replacing Jerome Powell. What are the implications for interest rates?

Amy: The US economy is generally considered to be on sound footing. Investors currently expect no changes to the Federal Funds rate this year.

Warsh does have some ideas that break from the current regime that could influence policy going forward. First, the 2% inflation target was set in 2012 and needs to be reevaluated. In general, Warsh is in favor of a broader interpretation of inflation by using various measures, instead of favoring a single measure such as personal consumption expenditures (PCE). Second, Warsh is in favor of reducing interest rates before much-anticipated productivity improvements show up in the economy, as opposed to remaining data-dependent. Third, Warsh believes the Fed’s balance sheet should be smaller, currently 22% of gross domestic product (GDP). (Reducing the size of the balance sheet relative to GDP is effectively a tightening of financial conditions). Finally, expect less communication from Fed officials. Warsh believes too much “Fed speak” has created unnecessary volatility in interest rates.

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