MARKET COMMENTARY

Last week brought two unwelcome surprises: a 35% spike in crude oil prices triggered by U.S. military conflict with Iran and a disappointing jobs report. 

Stocks drifted lower, and volatility picked up as investors rotated out of higher-growth areas and into more defensive names like utilities, dividend payers, and select energy stocks. 

The message from markets was cautious but not panicked. Slower growth, higher energy costs, and geopolitical risk are real headwinds, but a weaker economy could also give the Federal Reserve more reason to cut rates, which would eventually be a tailwind for investors. 

Here's a look at how the markets performed last week. 

Stock Index Performance 

• The S&P 500 declined 2.02%.
• The Nasdaq 100 dropped 1.27%.
• The Dow Jones Industrial Average lost 3.01%.

The Story Behind the Numbers

• The Job Market Is Slowing. February's jobs report was a clear disappointment. The economy shed 92,000 jobs, well below expectations for a modest gain. Data also revealed significant downward revisions to December and January, indicating a weaker labor market than previously reported. This isn't cause for alarm, but it does signal that the strong job market of recent years is cooling.
• The Broader Economy Is Still Holding Up. Despite the weak jobs report, a key measure of services industry activity • which covers everything from restaurants to healthcare to financial services • surged to its highest level since 2022. The takeaway here is that consumers are still spending, and businesses outside of government and tech are still growing.
• A Complicating Factor: Rising Oil Prices. Escalating conflict in the Middle East sent oil prices soaring last week. Higher energy costs can feed directly into inflation, which puts the Federal Reserve in a bind. Even with the job market softening, some investors now fear policymakers may feel pressured to keep interest rates •higher for longer• to keep energy-driven inflation in check, which can be a drag on both the economy and markets. 

The Weeks Ahead 

• The next main events are this upcoming Wednesday's (March 11th) Consumer Price Index (CPI) and next Wednesday's (March 18th) Producer Price Index (PPI) reports for February. A higher-than-expected reading on either could revive fears that inflation is stuck above the Fed's 2% target, especially with oil prices already pushing higher. A softer reading, on the other hand, could strengthen the case for rate cuts later this year.
• With the March 17-18 Federal Reserve meeting about a week away, investors will also be listening carefully to any public comments from Fed officials. As of the start of this week, markets still price a near-0% chance that the Fed will cut rates at the March meeting. The inflation reports, combined with Fed commentary, will shape market expectations heading into the meeting.

The next few months will likely bring more volatility as markets look for clarity on three fronts: whether the job market continues to weaken, whether oil prices stabilize or climb further, and how the Fed responds. For long-term investors, staying diversified across sectors remains one of the most effective ways to manage through periods like this.

If you have any questions about your portfolio or would like to talk through these shifts, don•t hesitate to reach out.

All the best,