MarketGrader U.S. Indexes: A Challenging First Quarter in 2026

MarketGrader Indexes started the year on a strong footing but faced a very challenging March following the outbreak of war in Iran, resulting in a difficult first quarter of 2026. Among the three primary markets in which we categorize our indexes—U.S., Developed Markets, and Emerging Markets—the U.S. segment experienced the most pronounced weakness.

A Challenging Quarter for U.S. Equities

Our latest quarterly report card includes 42 U.S. indexes and model portfolios. Of these, 18 outperformed their benchmarks during the quarter, while 24 underperformed. Taken together, all U.S. indexes delivered an average quarterly return of 0.25%, trailing their benchmarks by an average of 65 basis points (bps).

The 18 outperformers generated an average return of 0.6% and an average excess return of 225 basis points. In contrast, the 24 underperformers were flat for the quarter and posted an average excess return of -283 basis points (bps).

Among our Core U.S. indexes, large- and mid-cap strategies faced the greatest challenges. Our U.S. Large Cap indexes declined by an average of 6.6%, compared to a 4.3% decline in the S&P 500 Index. U.S. Mid Cap indexes performed somewhat better, falling 1.8% on average, while the S&P MidCap 400 Index and the Russell Midcap Index gained 2.5% and 1.3%, respectively.

A notable exception among large-cap strategies was the MarketGrader U.S. Large Cap 200 Index, which continues its strong run of outperformance relative to the S&P 500. The index declined 3.5% during the quarter, outperforming the S&P 500 by 85 bps. Through March 31, it leads the S&P 500 by 792 bps on a year-to-date basis. We will highlight this index in greater detail in a separate article.

Small-cap performance was mixed. Both the market-cap-weighted and equally weighted versions of the MarketGrader U.S. Small Cap Core Index trailed the S&P SmallCap 600 Index by 285 and 309 basis points, respectively. However, their more concentrated counterparts, the MarketGrader U.S. Small Cap Select 50 and MarketGrader U.S. Small Cap Select 30 Indexes, gained 6.7% and 3.7%, outperforming the benchmark by 371 and 21 bps, respectively.

Our two U.S. Income Indexes delivered particularly strong results during the quarter, as investors sought companies with stable and sustainable dividends amid market volatility. The MarketGrader U.S. Income 50 and MarketGrader U.S. Income 100 Indexes both outperformed their benchmark, the Dow Jones U.S. Select Dividend Index, on both a price and total return basis. The 50-stock index outperformed by 64 bps, while the 100-stock index outperformed by 236 basis bps.

Over the past year, the U.S. Income 50 and U.S. Income 100 Indexes now lead the Dow Jones U.S. Select Dividend Index by 77 and 316 bps, respectively. During this period, both have generated dividend-only returns of 4.5%, fulfilling their mandate to provide steady income while preserving capital appreciation potential.

One-Year Performance Remains Strong

Despite the quarter’s volatility, MarketGrader’s U.S. Core Indexes continue to post solid one-year results through the end of March. Only five of 26 U.S. Core Indexes trail their benchmarks over the past year, while the group has gained 22% on average. Across all indexes, the average excess return relative to benchmarks stands at 402 bps.

Leading the group are the MarketGrader U.S. Large Cap Value Index (100-count) and the MarketGrader U.S. Large Cap Value Select 30 Index, which have returned 34.3% and 33.6%, respectively, over the past 12 months. These indexes outperform their benchmark, the Russell 1000 Index, by 1,839 and 1,770 bps, respectively.

Download our latest MarketGrader vs. Benchmarks Report Card to see full results across all markets for the first quarter.