Last Week
War. What is it good for? Absolutely nothing for the financial markets.
The global stock markets continued to trade lower as the war in the Middle East intensified, driving energy prices to their highest levels since 2022. The S&P 500 extended its losing streak to 3 weeks, losing 1.6%; the Nasdaq Composite dipped 1.3%; and the Russell 2000 slipped 1.8%. Declining issues more than tripled the number of advancing issues, with only the Oil & Gas and Utility sectors finishing in the green. The Dollar rallied 1.5% and Gold dropped a similar percentage. Crude oil prices surged almost 10%, topping the $100 per barrel level on Thursday. The yield on the 10-year Treasury reached its highest level of 2026 at 4.29% after rising 16 basis points during the week.
Inflation data showed that the CPI rose 0.3% month over month in February, accelerating from a 0.2% increase in January and matching economists’ expectations. That data predated the war and the spike in gas prices; therefore, one can assume the future numbers will be worse. The Fed is in a difficult position as stagflation risks mount, putting the rate cut scenario in jeopardy.
Whereas the market has retreated from its record close set in January, the damage thus far has been modest, in the range of 5% depending on which index you are tracking. We suggest sticking to one’s long-term investment plan while ensuring you have not drifted into a higher-risk position following years of strong equity performance. Additionally, more stable dividend-paying stocks, which were out of favor during the AI craze, offer more attractive characteristics than the high-fliers. Despite the Dollar’s recent bounce, we still think holding gold makes sense as a hedge against a potential decline.
The Chicago Sports Scene has provided some relief from the otherwise very dark skies that we have endured thus far in March, as the Chicago Maroons Men’s basketball team advanced to the Division 3 Elite Eight. NCAA.com is airing the live stream of the next game this Thursday night. The Women’s team also made it to the sweet sixteen. Go Maroons!
This Week
The war rages on and will dominate the narrative, weighing heavily on global financial markets. The Strait of Hormuz is in focus, with President Trump calling for other nations to assist in protecting oil tankers. Iran has allowed a handful of tankers to pass through from nations that they do not view as enemies, while keeping a stranglehold on oil shipping.
On Wednesday, the Federal Open Market Committee will announce its monetary policy decision. Given the recent data and the war-related disruption, the Fed is in a very tricky situation and is unlikely to cut rates at this meeting. Investors will be listening carefully for any clues as to future policy moves as the specter of stagflation looms.
On Thursday, the Census Bureau reports new home sales data for January. The housing market has been soft, but could improve if mortgage rates trend lower, accompanied by new policies to promote affordable home ownership. The XHB (State Street SPDR Homebuilders ETF), a holding in our equity model ETF portfolio, has been under extreme pressure during the last few weeks as interest rates have been rising. For those who believe the housing market will improve, XHB offers an attractive entry point.
And finishing with more lyrics from “War,” the 1970 song by Edwin Starr and made famous by the Temptations:
It ain’t nothing but a heart breaker
(War) Friend only to The Undertaker, woo
Peace, love and understanding, tell me
Is there no place for them today?
They say we must fight to keep our freedom
But Lord knows there’s got to be a better way, oh
The stocks mentioned above may be holdings in our mutual funds. For more information, please visit www.nsinvest.com.