Published March 13, 2026
If we were to tell you that:
1) investors will lose confidence in where AI is headed and come to believe it will significantly harm almost all software companies
2) that the private credit engine fueling Wall Street would sputter with investors seeking many millions of dollars of their money back, and banks limiting those redemptions
3) that the U.S. would launch a war sending oil prices up two-fold in a matter of days with no end in sight
4) that said increase in oil prices would send bond yields higher removing any likelihood that the Fed will lower interest rates over, at least, the first half of the year
you would expect stock prices to …
We suspect the answer would NOT likely be “down modestly, about -5%”. Yet that’s where we stand currently.
To be fair, international stocks have been hit. Higher by +10% year-to-date only two weeks ago, international stocks have given virtually all that gain up. U.S. small cap stocks, higher by +9% in January, have seen that gain evaporate. Financial stocks are down -11% so far in 2026 as interest rates have spiked and private credit issues expanded.
We would argue that the Nasdaq weakness coming into all of these events has actually made the market more resilient – so far. The Nasdaq is in its sixth month of flat trade. That, while earnings have continued growing for the underlying companies. Hence, the market has been gradually becoming cheaper, slowly working off the “excessive” valuation it built up. Further, investors over the past year have been conditioned by the Trump Administration to EXPECT sharp reversals in policy. What’s seen as bad policy one day can be quickly removed the next. We believe investors have been applying this to the war with Iran – expecting an about-face any day, oil prices to come back down, and things to largely go back where they were.
Increasingly, this about-face scenario is losing steam though. Iran has certainly dug in, viewing the escalating disruption in oil markets and largely controlling the Strait of Hormuz as successes. Depending on who you believe, Israel has no reason to support an end to hostilities, seeing their opportunity to vanquish a long-dated foe.
Will investors find, as with last year’s tariff tantrum, that it all settles out fine with buy-the-dip investors rewarded yet again?
Or will this year’s lengthening list of market worries bring a more significant downside?
It’s entirely possible that all of the worries listed above conspire to leave indexes volatile but little changed this year. That earnings for the market’s major companies continue growing. Thus, a cheaper stock market awaiting a positive catalyst to kick off a new rally.
No one knows. Which is why we rely on models of price and volume to determine our portfolio position. Reflecting the market volatility, we have already had 10 signals this year. They’ve delivered a 70% win rate and a +4% return, well ahead of the broad market. Focusing on price and volume, ignoring the emotion-inducing headline noise, and being willing to change position quickly is working.
Market Update
Stocks kicked off the week with a +1.4% gain in the Nasdaq. President Trump noted that the war with Iran was largely “complete” and that the Group of Seven nations would begin releasing oil from strategic reserves – an effort to bring oil prices down. A flat day Tuesday on a dip in oil prices. Another flat day Wednesday though oil prices pushed higher +5% despite the plan to release strategic reserves. The rise in oil prices sent interest rates further upward. That negative offset a +9% surge in Oracle’s share price on surprisingly strong earnings. Oracle’s shares have been hammered on AI concerns and the debt the company is taking on to acquire data center capacity. A defiant Iran sent stocks -1.5% lower Thursday. The country has effectively blocked the Strait of Hormuz, a pathway for transiting 20% of the global oil shipments. Passage through the Strait has all but stopped since the war began two weeks ago. Stocks opened Friday higher. But once again, rising oil prices beget higher interest rates beget falling stocks. West Texas crude oil prices closed just shy of $100 Friday (they began the year at $57). 5-year interest rates closed at 3.87%; their highest level in eight months as any reduction by the Fed is now almost entirely off the table for 2026. Stocks dipped -0.6%.
The S&P 500 (SPY) slid -1.50% this week to fall back to its 10-week moving average for the first time since the rally kicked off last May. The Nasdaq (QQQ) slipped -1.01% to also visit its 10-week average. Small caps (IWM) fell -1.71%. U.S. treasuries have not been a safe haven so far in this weak period. Neither has gold. Of typical safe havens, only the U.S. dollar has risen the past two weeks driven higher by the rising interest rates.
Warm wishes and until next week.