Market Recap: March 2026

Market commentary

• U.S. growth is decelerating but remains intact. Fourth quarter GDP has been revised further downward, partly reflecting disruption from the government shutdown.
• Hiring has cooled, yet layoffs remain limited, and consumer spending continues to hold up, supported by wealth effects and tax refunds.
• Inflation pressures are resurfacing, driven mainly by supply-side factors such as energy, food, and transportation rather than excess demand, with services inflation remaining more persistent than goods.
• Financial conditions are tightening gradually, reflecting private credit liquidity concerns, equity downside risk, and waning wealth effects.
• Escalation of the conflict in Iran poses a key near-term macro risk, primarily through its effects on energy markets, supply chains, and inflationary pressures.

Select economic and market data

Equities

• U.S. stocks fell about 5% in March, with foreign markets underperforming due to their geographic exposure to the war and greater reliance on imported energy.
• Rising oil prices propelled the Energy sector (+10.3%) to the top spot in March, while all other S&P 500 sectors declined by at least 3.2%.

Fixed income

• The Fed remains on hold, with policymakers reluctant to tighten further amid slowing growth and unable to ease meaningfully while inflation remains elevated.
• Rising inflation concerns pushed bond yields sharply higher, resulting in mostly negative bond returns in March.

Strategic outlook

• Near-term caution toward equities is advisable, given heightened risks from geopolitical instability, trade uncertainty, and the potential for renewed inflationary pressures alongside an economic slowdown.
• Near-average expected returns projected for fixed income with the Fed on pause and rates reflective of economic conditions.
• Above-average volatility is likely given central bank involvement and geopolitical uncertainty.