March 30, 2026

“Be greedy when others are fearful and fearful when others are greedy”

Warren Buffett

Week of declines, the long-awaited correction is here. But first here are the miserable numbers. The S&P 500 lost 3.6%, the Dow Jones Industrial average surrendered 2.65%, Nasdaq got clobbered down 4.87%. The good news was Internationally, the FTSE 100 gained .5% and the MSCI-EAFE added .22%. The 2-Year Treasury paid 3.914% and the 10-Year yield was 4.428%.

So, what happened? The ongoing U.S.-Israeli conflict with Iran remained the primary driver of market moves. Disruptions in the Strait of Hormuz and broader Middle East tensions fueled energy supply concerns, pushing oil prices higher overall (with Brent briefly exceeding $110/barrel before some volatility and partial pullbacks). This stoked inflation fears, complicating the Federal Reserve’s outlook.

The Fed held rates steady at its meeting and projected only one rate cut for 2026 amid higher inflation expectations and a resilient (though cooling) labor market. Markets scaled back near-term easing bets, contributing to higher bond yields and pressure on risk assets. Some key economic data releases last week featured preliminary/ flash PMI surveys for March (providing early signals on business activity amid the conflict), inflation readings, and other indicators.

Inflation? The U.S. Producer Price Index (PPI) for February (released mid-week): Rose 0.7% month-over-month (hotter than the 0.3% expected), with services and goods contributing. Year-over-year PPI reached 3.4%, the fastest in a year, signaling building pipeline pressures that could worsen with elevated oil. So, expect some inflation increases driven by oil prices until the Straits of Hormuz are opened and crude flows again. According to the administration the world should not have much longer to wait.

The Market Reactions were no surprise and considering the historic series of events we are a bit surprised it has not been worse. Equities extended losses for a fourth or fifth consecutive week (depending on exact period), marking the worst stretch since the conflict intensified. The S&P 500 declined trading around 6,500–6,600 levels and down over 5–8% from January highs (briefly dipping below its 200-day moving average). The Dow fell and the tech-heavy Nasdaq also fell in the period, reflecting broad weakness outside of select areas. Sector performance: Energy was a clear standout (+2.75% or more weekly), extending YTD gains to 30–37% amid the oil surge. Financials posted modest gains in some sessions. Small caps (Russell 2000) also weakened (off1.7% last week).

How about bonds? Treasury yields rose as investors repriced for stickier inflation and fewer rate cuts. The 10-year U.S. Treasury yield climbed toward 4.38–4.44% (up ~10–20 bps intraweek, hitting levels not seen since mid-2025). The Bloomberg U.S. Aggregate Bond Index posted a small positive weekly return in one snapshot but faced broader selling pressure overall, with the curve showing some flattening.

Risk aversion prevailed, is setting the tone with equities and bonds both under pressure from the “higher for longer” rate implications of the oil shock and geopolitical uncertainty. However, the volatility associated with administration’s pronouncements seem to support a quick recovery when the conflict ends. Further our portfolios, due to the defensive nature, have held up quite well as I am reviewing client accounts at the end of this quarter.Looking ahead, markets will watch for further PMI/ISM data, retail sales, employment figures (e.g., ADP, nonfarm payrolls expectations around modest growth), and any de-escalation or escalation in the conflict. Persistent high oil could sustain inflation risks and cap rate-cut hopes, while any cooling in tensions might ease pressures on yields and support risk assets.

How about housing and mortgage rates as we head into the spring selling season?

Unfortunately, mortgage rates reversed some of their recent downward trend last week, climbing notably as geopolitical tensions in the Middle East and the associated surge in oil prices fueled inflation concerns and pushed Treasury yields higher. This added headwinds to an already affordability-challenged housing market. Freddie Mac 30-year fixed-rate mortgage average: Rose 16 basis points to 6.38% for the week ending March 26, 2026 (up from 6.22% the prior week). This marked the highest weekly average in several months but remained below the year-ago level of 6.65%.15-year fixed: Increased 21 basis points to 5.75% (from 5.54% previously). Mortgage applications declined sharply in recent weeks, with both purchase and refinance activity dropping amid the volatility. Recent data (mostly covering January–February 2026, released in March) pointed to a gradually improving but still constrained market with existing-home sales rose 1.7% month-over-month to a seasonally adjusted annual rate of 4.09 million units. This was a modest rebound (possibly weather-related from January weakness), with gains in the Midwest, South, and West. Year-over-year sales were slightly lower. Median sales price stood around $398,000 and inventory continued to edge higher. First-time buyers showed some increased participation when rates eased earlier in the year. Affordability improved modestly for several months running due to the prior dip in rates and slight inventory gains, but higher borrowing costs quickly eroded those gains. Homebuilder stocks and related sectors faced pressure from the rate spike and energy cost concerns. Forecasts for full-year 2026 (e.g., from Zillow) project existing-home sales around 4.2–4.24 million.

As we close the quarter with the extremely broad worldwide ramifications to both world order and financial markets, one must understand that the market volatility has been somewhat tame. I attribute it to the ongoing success of this administration militarily and tariff effects, despite the concerted efforts of all opposition forces, and you know who you are, will result in huge opportunities going forward. But, ever mindful of the consequences of failure and the need to stay for the time being defensive. Next week starts Holy Week, wishing all a blessed and Happy Easter Season.

Mike