March 2, 2026

“History provides a crucial insight regarding market crises: they are inevitable, painful and ultimately surmountable.”

Shelby M.C. Davis

What a week on the international front. But first here are the numbers. The S&P 500 lost .32%, Dow Jones Industrial Average was down 1.13%, the Nasdaq trimmed .76%. Internationally there is a lot of good news with the FTSE 100 up 2.09% and the MSCI-EAFE adding .60%. The 2 Year treasury paid 3.383% and the 10 Year dropped below 4% yielding 3.949%.

February was a challenging month for U.S. equities as growing scrutiny of AI-related capital expenditures and their associated impact on business models took a toll on large caps, leading to the third weekly decline for the S&P 500. A worse than expected producer-price reading on the final trading day created renewed inflation jitters and dampened hopes for Fed rate cuts, with the 500 closing down 0.8% for the month. Market leadership shifted toward smaller companies, with the S&P MidCap 400 and the S&P SmallCap 600 up 4% and 2%, respectively, outperforming their large-cap peers. Large-cap sector performance was mixed, reflecting a retreat from Big Tech optimism and a return to defensive sentiment. Utilities led, rising 10%, while Communication Services and Consumer Discretionary declined. Most of our reported factor indices posted gains, echoing the broader shift in leadership, with quality, dividend and low-volatility strategies leading the way, while Value outperformed Growth.

Fixed income markets generally performed well, with the 10-year U.S. Treasury yield falling below 4% for the first time since November, as investors sought safety amid stagflation fears. Gold and silver saw significant intramonth fluctuations amid strong safe-haven demand. The S&P GSCI Precious Metals Index advanced 12% in February, extending its leadership within commodities.

The macro driver that mattered was rates, yields firmed as traders stayed sensitive to sticky inflation and the Fed’s patience. That kept pressure on long-duration growth and pushed positioning toward cash flow, pricing power, and companies that can fund investment without stretching balance sheets.

As if investors didn’t have enough to digest, last Friday renewed the specter of inflation, as well. A hotter-than-expected producer-price-index showed wholesale prices were up 0.5% in January, an acceleration from the 0.4% rate in December. Today, at least, the bond market wasn’t ruffled. Add it to next week’s worry list.

More on that, but first. On February 28, 2026, the United States and Israel launched joint military strikes on Iran, with reports indicating the death of Iran’s Supreme Leader Ayatollah Ali Khamenei and the entire leadership and 40 military commanders with aims for regime change. Iran retaliated by targeting US assets in the region, escalating fears of a broader Middle East conflict. This geopolitical shock has rippled through global markets, with analysts warning of heightened volatility, particularly in energy and equities. The strikes come amid already fragile market conditions, influenced by factors like US tariffs and tech sector pressures. Below is a breakdown of the observed and anticipated effects on US markets as of March 1, 2026.

The conflict directly threatens oil supply routes, especially the Strait of Hormuz, through which about 20% of global oil flows. Key impacts include oil prices: Brent crude rose 2.9% to $72.87 per barrel on February 27, with futures expected to spike further when trading resumes. Analysts project prices could hit $90-100 per barrel in a prolonged scenario, adding 0.6-0.7 percentage points to global inflation. Some estimates suggest a jump to $85 if the strait is blockaded, or over $100 if escalation persists. Gas Prices in the US gasoline prices are forecasted to increase, exacerbating consumer costs and potentially derailing economic recovery efforts. Shipping disruptions could also raise prices for other goods. US stocks faced immediate pressure, with pre-market and futures indicating sharp declines. The event is seen as a “perfect selloff catalyst” for already vulnerable equities. Inflation and Growth: Higher oil could fuel inflation, tighten financial conditions, and risk recession in fragile economies. US pocketbooks hit via gas and goods prices, potentially affecting elections.

That is the doom and gloom scenario, however if the situation quickly moves to a new “reasonable” government and the Iranian Military concludes that resistance will result in disaster, this effect in the short term will end quickly and in the long term completely change the dynamics in the Middle East. The positive economic impact could be staggering. Why? short-term conflict might limit damage, but prolonged action could lead to sustained volatility and supply disruptions. The argument is whether markets will recover quickly from geopolitics, citing historical resilience. Overall, the strike has triggered a classic risk-off response, but outcomes depend on de-escalation speed. Historical patterns suggest recoveries within weeks if contained, though this event’s scale introduces unique risks. So, fear not, due to the historic volatility of the area and the tremendous wealth all directed in positive economic pursuits and the freeing of the largest middle east county consumers will have significant impact on all world and US Markets. We shall see…

A few words about inflation. The most recent official data from the U.S. Bureau of Labor Statistics shows that headline CPI inflation (Consumer Price Index for All Urban Consumers) stood at 2.4% year-over-year for the 12 months ending in January 2026. This marked a slowdown from 2.7% in December 2025 and was below market expectations of 2.5%. It represents the lowest level since May 2025. Monthly change: The CPI rose 0.2% in January (seasonally adjusted), down from 0.3% in December. Core inflation (excluding volatile food and energy): Eased to 2.5% year-over-year, the lowest since March 2021, with a monthly increase of 0.3%. Key drivers of the slowdown included falling energy prices (down 0.1% annually, with gasoline dropping sharply) and softer increases in shelter (3.0% vs. prior higher readings). Food inflation was around 2.9-3.1%. Nowcasts and forward-looking estimates (e.g., from the Cleveland Fed) suggest February 2026 CPI could come in around 2.4-2.5% year-over-year, with monthly gains of about 0.21-0.25%. The official February CPI data will be released on March 11, 2026. Overall, inflation has been trending downward toward the Federal Reserve’s 2% target, supported by easing energy costs and base effects from prior high readings dropping out. All this before the Iranian strikes.

Any Housing Good News? Mortgage rates have continued their downward trend in recent weeks, reaching multi-year lows. This improvement stems from cooling inflation, Federal Reserve policy expectations, and bond market dynamics earlier in the year. 30-year fixed-rate mortgage: The latest Freddie Mac Primary Mortgage Market Survey (as of February 26, 2026) shows an average of 5.98%, down from 6.01% the prior week and significantly below 6.76% a year ago. This marks the first time below 6% since 2022. Daily averages from sources like Mortgage News Daily hovered around 5.99-6.00% late last week, while lender marketplaces (e.g., Zillow) reported averages as low as 5.81%. Bankrate’s national average today stands at 6.04%. 15-year fixed-rate mortgage: Averaged 5.44% per Freddie Mac, with some sources showing 5.32-5.33%. Other types: 5/1 ARM around 5.82-6.34%, VA loans often in the low 5% range.

Rates are highly competitive right now, with many borrowers seeing quotes in the mid-to-high 5% range for top-tier credit. Forecasts for Q1 2026 from major groups (Fannie Mae, Wells Fargo, MBA) generally point to averages around 6.1%, though recent drops have outperformed expectations. Upcoming data like the March jobs report (March 6) could influence further movement. Housing market dynamics: The recent rate drop below 6% has boosted affordability and spurred refinancing and buyer interest after years of sluggish activity. Home prices remain elevated, but lower rates improve purchasing power (e.g., ~$275 monthly savings on a $400k loan vs. last year’s higher rates). Overall Housing Market Outlook

The market was showing signs of thawing with rates in the 5% range—more transactions, rising refinance activity, and renewed buyer confidence. The Iran situation adds volatility, but historical geopolitics often see quick recoveries if not prolonged. Key monitors this week: conflict updates, March jobs data, and oil price moves when markets fully reopen.

Let’s hope pragmatic and cooler heads prevail, as we move in uncharted directions in the Middle East.

Mik