March turned in a negative, volatile month for the market. April kicked off with a continuation, pushing the averages lower. The war in Iran escalated the downward pressure on the market. Crude oil hit $111.54 per barrel at the end of March. Prices at these levels were last seen in June 2022. As goes oil, so goes the market.
Energy surged higher and is the best performing sector in 2026. The only index to remain positive YTD through March is the Russell 2000. The market was due for a correction, and this may have been one, despite not quite pulling back the requisite 10% from recent highs.
We now have a fragile truce between the U.S. and Iran through Pakistan negotiations. The market has flipped positively as crude oil pricing retreated on hope of the cease fire and the opening of the Hormuz Strait. This reinforces remaining patient and invested through times of uncertainty.
S&P 500: Mar -5.10% Q1 -4.63% YTD (Apr 9th) -0.30%
DOW: Mar -5.38% Q1 -3.58% YTD (Apr 9th) +0.25%
NASDAQ: Mar -4.75% Q1 -7.11% YTD (Apr 9th) -1.81%
Russell 2000: Mar -5.04% Q1 +0.53% YTD (Apr 9th) +6.22%
Sector Performance YTD thru March:
Communication Services -7.10%
Consumer Discretionary -9.34%
Consumer Staples +7.01%
Energy +37.24%
Financials -9.80%
Healthcare -5.29%
Industrials +4.30%
Technology -9.25%
Materials +9.30%
Real Estate +1.94%
Utilities +7.52%
Current U.S. Treasury Yields:
6 Month Bill 3.66%
2 Year Note 3.78%
5 Year Note 3.91%
10 Year Note 4.29%
30 Year Note 4.89%
The Economy and the Fed:
Nonfarm payrolls rose in March, hitting 178,000 seasonally adjusted vs the 59,000 estimate. Health care fueled much of the increase. A far different picture than the large February decline. The Unemployment rate moved lower to 4.3%. The economy continues to be resilient.
Inflation remains above the Fed’s 2% target. Seasonally adjusted PCE printed 3% in February, with the all-items headline inflation at 2.8%. These numbers were in line with consensus estimates. Consumer sentiment at 47.6 is down 10.7% from March and is the lowest on record. This negates a Fed rate cut.
We don’t expect the Fed to hike rates, but a cut is off the table. The strong labor market, an increase in the money supply and rising energy costs complicate the Fed’s picture.
Warsh’s nomination has been delayed but is inevitable. Chair Powell will stay on the FOMC board after his term ends. Geopolitical risk is back in the market picture. Once the Iran war has reached a reasonable conclusion, Fed rate direction will be clearer.
Looking Ahead:
The market pullback has repriced equities. Stocks are cheaper. Market rotation is persistent in the market’s resilience. Q1 earnings are on tap, beginning next week with the banks. Private credit has altered bank performance. Banks will benefit from regulation support.
2026 S&P 500 earnings per share (EPS) have moved up to $315.00. The growth rate in earnings is projected at 15% YOY, and revenue at 7.2%. The top ten companies in the S&P 500 represent over 30% of returns. The market expects good prints for the quarter across industries. Adjustments will come should the war drag on.
The market may have bottomed. However, caution is still warranted. The U.S. economy is strong. The market has continued to broaden out, is less expensive and will bounce further with war resolutions. Stock selection remains paramount. We remain constructive on equities.