A (0:00)

Welcome back to the rundown for another weekend deep dive. Today we are doing something a little different. We're looking back at Q1 and doing a full market recap. Q1 of 2026 might go down as one of the wildest first quarters in recent memories. Stocks had their worst quarter in four years. Tech and Magnificent Seven stocks got crushed. Not to mention a war broke out in the Middle east, sending oil prices surging. So in today's episode, we're going to break down what happened in Q1, highlight some of the biggest winners and losers, talk about what all this might mean for the rest of 2026. We got a great one for you today. Let's dive in. Before we get into the winners and losers, let's first start with the big picture because Q1 was really a tale of two halves. January started off pretty decent. The S&P 500 actually hit all time highs a few times to start the year, building off a strong 2025 where the index was up over 16%. The general consensus on Wall street was that 2026 would be another solid year for stocks, driven by AI, strong earnings. Well then by February, things started to unravel. First, there was growing anxiety around software companies being disrupted by AI. In late January, Anthropic launched Claude Code, which was a tool designed to automate the kind of work that people normally use software subscriptions for. I'm talking things like data analysis, legal research and CRM workflows. And then by early February, Anthropic took over the market narrative. They started dropping industry specific plugins nearly every week. One week it was insurance companies, the next week it was logistics, then wealth management and marketing. And every time one of these plugins would come out, stocks in that industry would tank. Analysts called this the SaaS apocalypse. We did a whole deep dive on it and we're going to talk more about that in a bit. So yeah, the market was feeling a bit jittery about AI. And then things took another dramatic turn on February 28th. That's when US and Israeli forces launched military operations against Iran. And then things escalated quickly from there. Iran responded with drone and missile strikes on cities and energy infrastructure structure across the Gulf region. They also effectively shut down the Strait of Hormuz, which has about 20% of the world's oil supply pass through it every single day. So millions of barrels of oil could no longer move through the Strait of Hormuz, causing oil prices to go vertical. Brent crude was up 57 in March alone, hitting highs of a hundred and twenty dollars a barrel. For context, oil was trading around seventy dollars a barrel before the conflict started. And all of that sends shock waves through the entire market because higher oil prices means higher gas prices, which means higher, which means the Fed couldn't cut interest rates anymore. So that dragged down the market. And by March 31, the S&P 500 was down 4.6% for the year, while the Nasdaq dropped around 7%. That was the worst quarterly performance for those indices since Q3 of 2022. So, yeah, the vibes aren't great right now. It kind of feels like we're in a bear market. But despite all that carnage, the sell off was actually pretty narrow. It was mostly concentrated in big tech and software stocks. In fact, the equal weight S&P 500 ETF, which is just a version of the S and P where every stock gets the same weighting instead of letting mega cap companies dominate, it was actually slightly up in Q1. Here's another interesting stat. About one in four stocks in the S and P went up more than 10% for Q1. So this wasn't a broad market meltdown. A lot of stocks were actually hitting all time highs. So let's talk about a few of the winners from Q1. All right, let's get into some of the winners from Q1. And we have to start with the energy sector as a whole. The energy sector was up 39% percent in Q1, which is the best quarter on record for the sector. And the reason here is pretty straightforward. Oil prices. When Iran shut down the Strait OF HORMUZ, trapping 20% of the world's oil, oil prices went from $70 to nearly $120 a barrel. And when oil prices go up, energy companies make more money. Exxon And Chevron, the two biggest names in energy, were both up over 30% in the first quarter, hitting all time highs. Other names like Occidental Petroleum, which is one of Warren Buffett's favorite stocks, was up nearly 6, 60%. And some of the smaller exploration companies did even better. Now, I was actually pretty bullish on the energy sector as well heading into 2026, but I was basing that all from all the demand that would come from AI data centers. I didn't expect the Strait of Hormuz to be shut down for a month. Now, the big thing to watch going forward here is obviously what happens with Iran and the war. If there's a resolution soon, this trade of Hormuz reopens, well, then oil prices could drop 20 to 30% pretty quickly. And energy stocks would come back down. So the trade here is essentially a bet on how long this conflict lasts. It's kind of like a hedge on the overall portfolio. If this war drags on through the rest of the summer, then some analysts think that oil prices could go even higher, potentially $150 a barrel. But if there's a de escalation or a ceasefire soon, then you could see prices drop pretty quick. So, yeah, the energy sector was a big winner in Q1, but moving forward, it carries a lot of geopolitical risk. Now, let's talk about the best performing stock in the S&P 500 for Q1, which was SanDisk. SanDisk stock has surged 148% in the first three months of the year. And, and don't forget, SanDisk was also the best performing stock in the S&P 500 for all of 2025 as well. So that momentum from last year has carried over into this year. This is an AI related surge. Sandisk makes NAND flash memory, which is the backbone of modern digital storage. Every photo on your iPhone, every document on your laptop lives on NAND memory. And right now there's a massive shortage of NAND memory. Demand is surging right now, especially from AI data centers that need tons of storage, while supply has been constrained because memory manufacturers have shifted their focus from NAND memory to high bandwidth memory, which is needed for AI chips. And it's a more profitable business. So there's an insane demand for NAND memory and a limited supply which is sending prices through the roof. And SanDisk has been one of the biggest beneficiaries of that. And their most recent earnings report, their margins expanded to 65%, well ahead of the 49% that analysts were expecting. And some analysts say that the supply constraint could last until 2028, which would mean that we're still in the early innings of this cycle. Now, the risk with SanDisk moving forward is the same risk that comes with any cyclical stock. Memory is famously a boom and bust. Industry prices go up, everyone makes a fortune, then supply catches up, then prices collapse, and then a lot of companies are left holding the bag. The same thing is going to happen this time. It's just a matter of how long is it going to take. But for now, SanDisk investors are riding the way. If you guys want to learn more about sandisk and the bull and bear case moving forward, check out our deep dive that we did about the company a few weeks ago. We'll put a link in the description. Let's talk about one more winner to wrap this section. This might be the most interesting winner from Q1. It's a company called Lumentum. Now, unless you're deep in the weeds on AI infrastructure, you probably haven't heard of this company. But Lumentum has been one of the best performing stocks in the entire market this year, with shares going up 80% in Q1. And if you zoom out, the stock has gone up over 1000% in the last 12 months. See, Lumentum makes optical and photonic products needed for data centers. Think lasers, optical circuit switches and high speed transceivers. Basically they make the physical components that allow data to move at the speed of light inside data centers. So like, if Nvidia GPUs are the brains of AI, Lumentum makes the nervous system. Without their products, all those GPUs couldn't talk to each other and the demand for their products is through the roof right now. Their most recent quarter crushed estimates showing revenue growth of sales 65% year over year to $665 million. The company also got a big boost a few weeks ago after Nvidia announced a $2 billion investment in the company. That was a massive vote of confidence. Oh, and not to mention, the company also got added to the S&P 500 in late March, which was also a big deal. Now looking ahead, the things to watch is their next earnings report, which is on May 12. Since the stock has had a massive run up, the expectations are sky high, but the company does expect revenue to grow by 85%. All right, so those were some of the big winners from Q1. Now let's talk about the losers. All right, now let's flip the script and talk about the losers because there were some notable ones. First up, let's talk about big tech and software companies. We briefly mentioned them at the start of this episode, but it's worth zooming in here because the damage to software stocks in big tech was really the defining story of Q1. You know, every single company in the Magnificent Seven was in the red for Q1, losing a combined $2 trillion in market cap from their highs. Now, after being hot for three consecutive years, the Magnificent Seven are finally starting to pull back. The worst of the bunch was Microsoft, which fell over 23% in Q1. That was the worst quarter for Microsoft since the financial crisis in 2008. The reason that these companies like Microsoft got hit so hard is growing skepticism about the returns on all their AI spending. We learned during earnings that the hyperscalers which includes Microsoft, Meta, Amazon, and Google, plan to spend around $700 billion on AI capex in 2026. So investors are starting to get impatient and they want to see some sort of ROI on all that investment. But it's not just the Magnificent Seven getting crushed. The entire software sector was down big in Q1. The ETF IGV, which tracks software companies like Salesforce, Adobe and ServiceNow, dropped more than 20% in Q1. Analysts are calling this the SaaS apocalypse. We even did a deep dive on it a few weeks ago. Now, because of the war with Iran. Over the last few weeks, not as many people are talking about the software sell off, but things really haven't improved. Many software names are trading near their lows for the year. You know, we'll have to see the narrative changes moving forward. Personally, I'm still pretty bullish because I don't think these big software companies like Salesforce or ServiceNow are gonna be replaced by AI anytime soon. But the market isn't willing to give these companies high multiples anymore. Next up, let's talk about Robinhood. Shares of the finance company fell 39% in Q1. You know, Robinhood came into 2026 riding a ton of momentum. 2025 was a monster year for the company, with the stock jumping 200% off the back of strong growth. Revenue for the company was up 50% last year, and total assets under management grew to $324 billion, which is more than double from their 2021 levels. But, you know, Q1 was rough, and a big reason for that is the crypto bear market. Here's the thing about Robinhood that a lot of people don't realize. Crypto trading is their biggest revenue driver. Crypto generates more revenues than equities and options trading. So when the crypto market is doing well, Robinhood tends to do well. And when crypto is doing bad, like it is right now, Robinhood tends to take a hit. You know, crypto has had a brutal start to 2026. Bitcoin is down around 40% from its highs back in October. Ethereum is down over 50%. To make matters worse, the macro environment has been terrible. You know, you got wars in the Middle east, inflation fears, rising oil prices. All of that pushes investors towards less risky assets. So with crypto in a bear market, Robinhood saw crypto trading revenues fall 38% year over year in Q4. Now, it's not all bad news for Robinhood. Their options trading business actually jumped 41%. And they're seeing a lot of traction with prediction markets. There were over 12 billion events contracts traded in 2025, and in January of 2026 alone, there were over 3.4 billion events contracts traded on Robinhood, which is a new record for the company. Now keep in mind, a ton of the prediction market volumes are just SP sports bets. So Robinhood is kind of becoming a gambling app. Not sure if that's smart long term, but it is helping boost the revenue numbers in the short term. Finally, let's talk about the worst performing stock in the S&P 500. For Q1, it was AppLovin. The stock fell 41% in the first three months of the year. Applovin is an advertising platform and a marketplace for mobile apps and games. If you ever played Candy Crush or another game on your phone, you might see these random ads pop up while you're playing. Odds are Applovin was the one placing those ads. Now, Applovin was one of the hottest stocks in 2025, with shares doubling off the backs of 70%, revenue growth and profit growth of 111%. But sentiment around the company has turned negative for a few reasons. For one, there are some legal clouds hanging over the company. Some short sellers have accused Applovin of fueling growth through questionable advertising practices, specifically something called fingerprinting, which is a data collection technique that's been banned. The SEC has now opened an investigation into the company and and Bloomberg confirmed in February that the investigation is still ongoing. Now, Applovin denies any wrongdoing here, but when the SEC starts poking around, it makes investors nervous, leading to the sell off in the stock price. And overall, I think that Applovin's valuation got a bit too stretched. The stock was trading under $40 at the start of 2024, but the value peaked at over $700 back in December of 2025. So that raised expectations for the company. And despite the company beating estimates on their latest earnings report, the stock still fell. So yeah, that's how Applovin ended up as the biggest loser in the S&P 500 for Q1 of 2026. So what's my take on all of this? Well, Q1 was ugly, but honestly, given all the uncertainty around the war and the Strait of Hormuz being closed, I'm kind of surprised that it wasn't worse. And I think the reason for that might be because the fundamentals of the market are actually still pretty solid. Analysts are expecting S&P 500 companies to grow earnings by 13% in Q1, which would be the sixth consecutive quarter of double digit earnings growth. We should find out pretty soon. Earnings season is right around the corner and these earnings could set the tone for Q2 and beyond. I think if companies report strong numbers and give confidence guidance despite all the macro and geopolitical uncertainty, that could give investors the confidence to get bullish again. But look, if companies come back and start cutting forecasts because of oil prices or inflation or softer consumer demand, then we could be in for some more pain ahead. For now, most Wall street firms are still maintaining their bullish price targets from the start of the year. Goldman Sachs has a year end price target of $7,600. The index is currently trading at 6,500. So Goldman Sachs thinks the index will rally nearly 20% from here. My personal feeling is that I think the market could trade sideways for a bit. I think we got spoiled over the last three years with double digit gains. I don't think we're going to get that this year, but I'm also not overwhelmingly bearish either. The next few weeks are setting out to be a pretty crucial one. We'll have to see what happens with the war with Iran and if Hormuz opens back up. And we'll also have to see what the earnings come in at and what these executives are saying about their forecast moving forward. We're going to be staying on top of it. So it's a great time to get subscribed to the podcast if you haven't already and tune into our daily 10 minute market recast which we post every single day throughout the week. Well, all right guys, hope you enjoyed that recap of Q1. If you did consider giving us a 5 star rating on Apple Spotify. Wherever you listen to your podcast, if you are listening on Spotify and YouTube, please leave us a comment. All that engagement really does help us out and it helps other people find the show. Thank you guys again for listening, watching and commenting. Shout out to Mike and Connor for all the work behind the scenes and we'll see you guys back here tomorrow.