Hello all - we hope you had a better March than the markets did.
What a month. The war in Iran sent stocks to their worst month in four years, while commodities like oil saw record gains. For stocks, the Dow was down 4.6%, the S&P 500 lost 5.0%, and the Nasdaq, which has a higher concentration of tech stocks, was off 3.4%.
We also closed out the first quarter, which was the worst quarter in four years.
What a month. The war in Iran sent stocks to their worst month in four years, while commodities like oil saw record gains. For stocks, the Dow was down 4.6%, the S&P 500 lost 5.0%, and the Nasdaq, which has a higher concentration of tech stocks, was off 3.4%.
We also closed out the first quarter, which was the worst quarter in four years.
Here’s a look at how the markets moved this month:
Here’s a look at how the various market sectors performed this month.
Needless to say, the markets were incredibly volatile this month.
Volatility in the bond market was also high. We don’t talk about this very often, but the volatility in the bond markets often mirrors the level of the stock market.
As you can see in the chart below, the gap between the two indexes has widened.
Will the stock market (black line) fall further to catch up with the bond market (blue line), or will the bond market rise to catch up to stocks?
As you can see in the chart below, the gap between the two indexes has widened.
Will the stock market (black line) fall further to catch up with the bond market (blue line), or will the bond market rise to catch up to stocks?
Not everything was down, though. With the rise in oil prices, energy stocks did very well.
We talked about natural resources companies last month, since they were immune to AI slowdowns. These are companies like Exxon, Newmont Mining, and Freeport McMoran. This sector also held up well during the chaos of this month.
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As you are clearly aware, oil and gas prices have seen a historical rise this month. Oil, in particular, saw its biggest monthly gain, ever.
Here’s a look at the rise in gas prices:
Interestingly, as oil rose, stocks fell.
Why did stocks fall as oil rose? It goes back to the Fed. Higher gas prices mean higher inflation. Higher inflation means the Fed is less likely to lower interest rates this year. In fact, the market is predicting no rate cuts this year. Some even think there could be a rate hike.
This caused the U.S. dollar to have its best month since 2024.
It also caused gold to fall.
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FED
Speaking of the Fed – and switching gears a bit – the Fed held another policy meeting this month.
They held rates steady, as expected, and signaled that it’s possible there will be fewer rate cuts this year than people expect. This added to the pressure in the markets.
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INFLATION
Inflation numbers released this month showed a slight increase in inflation. Note that this number was measuring inflation the month before the Iran war started.
The month-to-month number shows inflation still rising, too.
When excluding food and energy (what economists call the “core” inflation), prices keep climbing.
The most surprising inflation number out this month was the PPI. It showed inflation at the business level was much higher than expected.
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OTHER ECONOMIC DATA
Other economic data releases were mixed this month.
The unemployment picture looks very poor as we saw a surprising drop in jobs.
The strength of the manufacturing and service sectors continues to hold up, though.
Retail sales were slightly lower.
Durable goods were lower, too, but when excluding a few large aircraft orders, the durable goods weren’t that bad.
Consumer confidence continues to be an issue. It showed slight improvement in the last two reports, but it has been trending lower, overall.
Small business optimism was slightly lower.
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Where does the market go from here?
Stocks look very, very oversold (cheap) and it’s a very attractive time to buy here. As the month closed out, the risks with the Iran war seemed to fade, so a wind down in the conflict will be very beneficial for investors. However, there’s no telling what may actually happen.
Lastly, we will note that after oil shocks like we just saw, markets tend to languish so any rebound may be short-lived.
This commentary is for informational purposes and is not investment advice, an indicator of future performance, a solicitation, an offer to buy or sell, or a recommendation for any security. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing. Past performance cannot guarantee results.
