Investors across the globe shed stocks for the fourth consecutive week as the conflict in the Middle East intensified causing a spike in oil and fertilizer prices (see below). Adding to this “buffet” of concerns was a more hawkish post-FOMC meeting tone struck by the Federal Reserve, rising interest rates and the fear of stagflation.
Historically, it is during these periods of great uncertainty that provide the opportunity and, although not there yet, we believe we are closer to the end of this shallow correction than the beginning.
· In our opinion, we are currently in a period of market volatility, not economic instability. However, should the war in Iran persist for another month or two or more specifically should the situation in the Strait of Hormuz not change, which is NOT our base case, expect economic instability.
· The members of the Open Market Committee of the Federal Reserve (FOMC) concluded its regularly scheduled two-day meeting this past Wednesday and decided to leave the target range for its benchmark Federal Funds Rate at 3½% to 3¾%. Contained within its statement released at the conclusion of the meeting was the following, “the implications of developments in the Middle East for the U.S. economy are uncertain.” Fed Chair Jerome Powell emphasized this sentiment during the post-meeting press conference noting that “near term measures of inflation expectations have risen in recent weeks, likely reflecting the substantial rise in oil prices caused by the supply disruptions in the Middle East.”
· The yield on the 10-year U.S. Treasury Note continues to climb, rising from 4.05% at the beginning of the month to 4.39% at the close of business on Friday as concerns grew that the recent oil driven inflation which has pushed the price of a gallon of gas up by $0.50 to $3.50 is going to hang around. This in turn makes it less likely that, despite the weakness in the labor market, the Fed will cut interest rates.
· According to the International Energy Agency, “the war in the Middle East is creating the largest supply disruption in the history of the global oil market. With crude and oil product flows through the Strait of Hormuz plunging from around 20 mb/d before the war to a trickle currently, limiting capacity available to bypass the crucial waterway, and storage filling up. Gulf countries have cut total oil production by at least 10 md/d.”
· The war is also causing fertilizer prices to be impacted as according to The Fertilizer Institute, “nearly 50 percent of the global urea exports originate from countries west of the Strait and transit through this critical waterway.” With a limited window for planting, this is an issue that American farmers as well as consumers will be monitoring carefully.
· “Gold’s double-digit percentage decline this month is on pace for the largest monthly decline in the commodity since June 2013 and, if it holds, would rank as the eighth largest one-month decline in gold since at least 1975. What’s even more interesting is that this month’s decline follows a double-digit percentage gain in February.” In our opinion, we think after a time to settle, gold potentially looks interesting. (Source; Bespoke Investment Group)
· The future is upon us. This past Thursday Uber (UBER) announced plans to invest up to $1.25 billion in EV maker Rivian (RIVN) as part of a deal to put 50,000 robotaxis on the road by 2031. As part of the deal Uber will purchase 10,000 autonomously driven versions of Rivian’s R2 electric vehicle, with the options of purchasing another 40,000 at a future date.
It’s The Economy…”
· According to the January 2026 Monthly New Residential Sales report released by the U.S. Census Bureau and HUD, sales of new single-family houses fell to a seasonally adjusted annual rate of 587,000, marking a 17.6 percent decrease from the revised December 2025 figure. This downward trend is also reflected year-over-year, with sales sitting 11.3 percent lower than in January 2025. Home prices saw a simultaneous decline, as the median sales price dropped to $400,500 and the average price fell to $499,500. Despite the slowing sales pace, the inventory of new houses for sale remained relatively stable at 476,000 units, which now represents a 9.7-month supply at the current rate of consumption. This indicates a significant increase in the months' supply compared to both the previous month and the previous year. Due to scheduling updates, the upcoming reports for February and March 2026 have been moved to a combined release date of May 5, 2026. (Source; U.S. Census Bureau)
· The U.S. Department of Labor's news release for the week ending March 14, 2026, indicates a slight strengthening in the labor market as seasonally adjusted initial unemployment claims fell by 8,000 to a level of 205,000. This decrease contributed to a drop in the four-week moving average, which now stands at 210,750. Despite the dip in new filings, the total number of people already receiving benefits rose slightly, with insured unemployment increasing by 10,000 to reach 1,857,000 for the week ending March 7. The seasonally adjusted-insured unemployment rate remained stable at 1.2 percent.
· The Producer Price Index, a gauge of inflation at the wholesale level, increased 0.7 percent in February 2026, marking a continued upward trend following gains in the previous two months. This rise was driven by a 1.1-percent jump in final demand goods and a 0.5-percent advance in services. On an annual basis, the index rose 3.4 percent for the 12 months ended in February. Significant contributors to the monthly increase included a 2.4-percent spike in final demand foods—largely due to a nearly 50-percent surge in vegetable prices—and a 5.7-percent increase in traveler accommodation services. Conversely, some sectors saw declines, such as a 4.5-percent drop in retail margins for apparel and footwear. (Source; Bureau of Labor Statistics)
Economic Reports scheduled to be released this week, include the following – on Monday, January Construction Spending; on Thursday, Initial Claims for Unemployment Benefits; and, on Friday the Final March Reading on Consumer Sentiment from the University of Michigan.
Several potentially market moving companies are scheduled to report earnings, to include Dollar Cintas (CTAS), Paychex (PAYX), Jefferies Financial (JEF), Commercial Metals (CMC), Carnival (CCL) and BYD Company (BYDDF).
