Market Update
The first quarter has been full of market volatility with moments of record-setting rallies and recent declines. LPL Research analyzed the recent decline in the equity markets and provided a technical outlook for investors. Their analysis shows that even though downside risks have increased and volatility remains, the fundamental and long-term technical backdrop remains encouraging.
The report attributes the recent market weakness to a combination of factors:
- Geopolitical Conflict: The war involving Iran and the closure of the Strait of Hormuz created a massive supply shock in oil, driving prices to multi-year highs.
- Inflation and Rates: The energy spike revived inflation fears, leading markets to price in a "higher-for-longer" interest rate environment and potential further tightening by the Federal Reserve.
- AI Cooling: Initial momentum from artificial intelligence spending faded as concerns grew over the costs and pace of disruption.
“A bull market can sometimes cause investors to forget that drawdowns are not anomalies, they are a normal and frequent part of market behavior.”
- Adam Turnquist, LPL Research
Bull Markets are Not Linear
The markets spend about 70% of the time in some form of a drawdown, and these pullbacks do not necessarily prevent a positive annual return. Historical data across 26 geopolitical events shows the S&P 500 typically gains an average of 7.8% in the 12 months following such shocks. Their chart below shows that even sizeable drawdowns have not always translated to down years.
Source: LPL Research, Bloomberg 03/30/26
Disclosures: Past performance is no guarantee of future results. All indexes are unmanaged and can’t be invested in directly. The modern design of the S&P 500 stock index was first launched in 1957. Performance back to 1950 incorporates the performance of the predecessor index, the S&P.
Read the full article HERE.
Market Recap
March 2026 was a volatile and difficult month for U.S. markets. Despite a record-breaking surge on the final day of the month, major indices finished March firmly in the red.
- The S&P 500 was down -5.09% for the month after geopolitical risk outweighed strong corporate earnings fundamentals.
- The Nasdaq Composite Index posted a decline of -4.75% for March.
- The Dow Jones Industrial Average (DJIA) declined -5.38% even though it had a jump on the last day of the month.
As always, if you have questions about how the economy may impact your investments, please don’t hesitate to reach out to us.
Sources:
https://www.morningstar.com/indexes/spi/spx/performance
https://www.morningstar.com/indexes/dji/!dji/performance
https://www.morningstar.com/indexes/xnas/@cco/performance
https://www.lpl.com/research/blog/technical-perspective-on-the-current-drawdown.html