Monthly Market Review — March 2026

Equities

Global equities (‑6.2%) declined sharply in March, surrendering their year‑to‑date gains as geopolitical conflict and policy uncertainty overtook fundamentals as the primary drivers of market sentiment. Escalating hostilities between the US, Israel, and Iran remained the central source of volatility, particularly through sustained disruption to energy infrastructure and critical shipping lanes that pushed oil prices higher and revived concerns about inflation and its second‑order effects on global economic growth. Against this unsettled backdrop, corporate fundamentals proved relatively resilient, with earnings expectations still reflecting solid growth, led by the technology sector, even as valuation multiples came under pressure. Policy divergence among major central banks persisted, driven by differing inflation and economic growth rates and varying exposures to external macroeconomic shocks. Economies that are more sensitive to energy prices and labor market tightness remained biased toward restrictive policy, while those facing softer demand or longer‑standing disinflationary trends moved more cautiously toward policy normalization. In the US, the administration’s newly implemented 10% global tariff — introduced after the Supreme Court struck down earlier measures under the International Emergency Economic Powers Act — remained in place, prolonging trade uncertainty. In Japan, Prime Minister Sanae Takaichi consolidated her political mandate following her electoral victory, signaling policy continuity amid heightened global instability.

US
US equities (-5.0%) broadly declined and volatility spiked as market sentiment shifted between fears of a prolonged war in Iran and hopes for a quick resolution, spurring considerable uncertainty about the path of inflation and economic growth. The Federal Reserve Bank of Kansas City estimates that the US economy grew at a moderate 2.0% annualized rate in the first quarter, in line with GDP growth of 2.1% in 2025. In February, the headline and core Consumer Price Indices (CPIs) were stable at 2.4% and 2.5%, respectively, while the Producer Price Index (PPI) rose at the fastest pace in seven months, exceeding expectations and indicating that prices increased throughout the value chain. Economists expect the inflationary impact of the war in Iran to appear in the March CPI and PPI reports, which are released in April. As expected, the US Federal Reserve (Fed) held interest rates steady, with the Fed’s quarterly “dot plot” showing only one projected interest-rate cut in 2026. However, Fed Chair Jerome Powell stated that the bank’s outlook for interest rates, inflation, and the labor market was highly uncertain as policymakers grapple with the economic implications of the war in Iran and spiking crude oil prices. According to FactSet, analysts forecast earnings for the S&P 500 Index to grow 13.0% year over year in the first quarter, compared to 13.9% in the fourth quarter.

Economic data released during the month was mixed. In February, a rise in the unemployment rate to 4.4% and a surprisingly large 92,000 decline in nonfarm payrolls cast doubt on views that the labor market has stabilized, although the sharp drop in jobs was partially due to a series of temporary disruptions. Subdued continuing and initial jobless claims in March still suggested a “low hire, low fire” labor market environment. After three consecutive monthly declines, retail sales rose at a solid 0.6% pace in February. Economists anticipate that larger tax refunds in 2026 and tax cuts will boost consumer finances and provide a tailwind to purchasing; however, soaring gasoline prices and the broader financial impacts of the Iran conflict threaten to undercut spending. The Conference Board’s Consumer Confidence Index surprisingly edged up to 91.8, despite concerns about the labor market and the prospect of higher inflation over the next 12 months due to tariffs and surging oil prices. A swift rise in mortgage rates in March was a blow to the sluggish housing market, reducing affordability and refinancing activity ahead of the critical spring homebuying season.

The Institute of Supply Management (ISM) Manufacturing Index edged up to 52.7 in March, the highest level since August 2022. Concerningly, inflation pressures in the manufacturing sector mounted; input prices increased to their highest level since June 2022, and suppliers’ delivery times lengthened as military action in the Middle East snarled supply chains. The services sector expanded at an accelerated pace, with the ISM Services Index soaring to 56.1 in February, from 53.6, thanks to robust growth in new orders and exports, higher employment in the sector, and accelerating production. Small-business sentiment remained above its historical average in February, although higher oil prices could upend sentiment in the months ahead.

Within the S&P 500 Index (-5.0%), 10 of the 11 sectors posted negative results for the month. Industrials (-8.4%) was the worst-performing sector, led lower by aerospace & defense (-10.6%) and machinery (-8.3%). Health care (-8.1%) and consumer staples (-7.4%) also underperformed the index. Energy (+10.4%) was the best-performing sector, supported by strength in oil, gas, and consumable fuels.

Europe
European equities (-7.3%) dropped sharply. Damage to energy infrastructure in the Middle East and the near closure of the Strait of Hormuz delivered simultaneous energy and inflation shocks to Europe, heightening market volatility and significantly altering the economic and policy outlooks for financial markets and the region’s central banks. Eurozone business activity almost stalled in March as inflation expectations surged and supplier delivery times soared. The S&P Global Flash Eurozone Composite Purchasing Managers’ Index (PMI) slipped to a 10-month low of 50.5, driven by near stagnation in services sector activity. Notably, German output slowed but continued to expand, while French business activity contracted further. The European Central Bank (ECB) lowered its GDP growth forecast for 2026 to 0.9%, from 1.2%, and significantly lifted its headline inflation forecast to 2.6%, from 1.9%, while leaving interest rates unchanged for the sixth consecutive time. ECB President Christine Lagarde warned that the bank could increase rates as early as April if the inflation shock spirals out of control. The central banks of Norway, Sweden, Switzerland, and the UK kept policy steady. Annual eurozone headline inflation jumped to 2.5% in March, from 1.9% in February, as soaring energy prices pushed inflation to its highest level since January 2025. Core inflation surprisingly eased to 2.3%.

The S&P Global Eurozone Manufacturing PMI continued to grow, hitting a 45-month high of 51.6 in March amid modest growth in production and new orders. However, the Middle East conflict upset the recent positive momentum in the sector, as input prices accelerated to their highest level since October 2022, while output prices rose at a faster pace. Suppliers’ delivery times also lengthened considerably. The S&P Global Flash Eurozone Composite PMI revealed that services sector activity continued to expand in March for the tenth consecutive month, yet activity slowed sharply to near stagnation. Both input costs and output price inflation increased at a faster pace. The European Commission’s Economic Sentiment Indicator decreased to 96.6 in March; industry confidence remained broadly stable, while consumer confidence fell drastically.

Germany’s (-10.2%) manufacturing sector expanded further in March and at its quickest pace since May 2022. Higher rates of output and new-order growth lifted the headline S&P Global German Manufacturing PMI to 52.2, despite signs of increasing stress on supply chains. However, the ZEW Indicator of Economic Sentiment plummeted by 58.8 points to -0.5 in March, far below market expectations of 39, reflecting concerns about energy prices and inflation. The UK’s (-5.9%) economy unexpectedly flatlined in January, as the dominant services sector struggled. Furthermore, the S&P Global Flash UK PMI Composite Output Index showed a sharp slowdown in business activity in March, as input prices and supply chains were heavily impacted by the war in the Middle East. Annual headline inflation stayed steady at 3.0% in February, but the combination of weak economic growth and rising inflation pressures posed challenges to the Bank of England.

Pacific Basin
Pacific Basin equities (-9.2%) declined over the month. In Japan (-10.6%), Bank of Japan (BOJ) Governor Kazuo Ueda warned that the Middle East conflict could weigh on the economy through higher energy prices and market volatility. As expected, the BOJ held its benchmark rate steady at 0.75%. However, the bank’s hawkish tone kept expectations for an April rate hike intact, as price stability remains a priority amid oil-driven inflation pressures. Fourth-quarter GDP growth was revised significantly higher to 1.3% annualized, supported by resilient consumption and business spending. In January, annual real wage growth of 1.4% was larger than expected and the highest in decades, offering a rare boost to household purchasing power. In February, inflation eased to its slowest pace in nearly four years, as government utility subsidies dragged energy costs lower. Core CPI (excluding fresh food) rose 1.6% annually, while headline inflation increased 1.3%. However, soaring gas prices threatened to prolong the cost-of-living squeeze on consumers, as Japan’s heavy reliance on imported energy makes it vulnerable to escalating tensions in the Middle East. Even so, firm underlying price pressures kept the BOJ’s tightening bias intact.

In Australia (-6.4%), the Reserve Bank of Australia (RBA) delivered its second consecutive rate hike of 25 basis points (bps), lifting the cash rate to 4.1% in a narrow five-to-four split decision. The move came as inflationary pressures intensified amid a tight labor market, resilient consumer spending, and the global energy shock, which is expected to ripple through the economy in the months ahead. Markets anticipate additional rate hikes by the RBA, which lifted sovereign yields to a 14-year high. This sentiment was solidified against a solid economic backdrop; Australia’s fourth‑quarter GDP grew 0.8% from the prior quarter and accelerated to 2.6% annually, while household spending remained resilient in January. Elevated inflation in February further reinforced beliefs of persistent underlying price pressures, even before the Iran conflict pushed energy costs sharply higher. The labor market stayed tight as employment rose by 48,000, and the jobless rate was historically low, increasing the probability of a May rate hike.

In Singapore (-3.8%), the government warned it may revise its economic outlook lower, as a sharp rise in global energy prices threatened to raise costs and weigh on growth. Additionally, the Monetary Authority of Singapore announced that it may adjust monetary policy to safeguard medium-term price stability. Economic data released during the month pointed to patchier demand. Non-oil exports rose 4.0% year over year — well below the 9.2% increase in January — as electronics growth moderated. Retail sales fell 0.4% in January despite a solid rebound from the previous month. Headline inflation was steady at 1.2% in February, while core inflation climbed to 1.4% — the highest level since late 2024 — as underlying cost pressures picked up. Nevertheless, the inflation and economic outlook largely hinge on the severity and persistence of the energy shock given Singapore’s heavy reliance on imported energy.

Emerging Markets

Emerging markets (EM) equities (-10.5%) fell steeply in March, with all regions ending in negative territory. Asia led the decline, followed by Europe, the Middle East, and Africa (EMEA), and Latin America.

In Asia (-11.9%), China (-7.4%) set its 2026 GDP growth target at 4.5% – 5%, the lowest since the early 1990s. Lackluster consumer spending, weak inflation, property market strains, and trade tensions with the US continued to weigh on the economy, while the war in Iran constricted China’s oil supply and posed an additional headwind to growth. Factory activity remained the key impetus for the economy. Industrial production expanded 6.3% year over year in the first two months of 2026, accelerating from 5.2% in December, while the manufacturing PMI expanded modestly after two months of contraction. Exports surged nearly 22% year over year in the first two months of 2026, supported by strong shipments of computer chips, autos, and electronics. In contrast, the property sector remained under pressure, with a 3.2% year-over-year drop in new home prices in February marking the steepest decline in eight months. Taiwan’s (-10.8%) central bank significantly upgraded its 2026 GDP growth forecast to 7.28% thanks to booming tech exports. It also raised its 2026 inflation forecast from 1.63% to 1.80% and warned that conflict in the Middle East could lead to tighter monetary policy. In February, exports rose 20.6% year over year, softer than expected and lower than in January, when the economy was growing at its fastest pace in 16 years. South Korea (-20.6%) plunged even as exports in March surged at their fastest pace in four decades, up 48.3% from a year earlier to US$86.13 billion. The country imports around 70% of its crude oil and 20% of its liquefied natural gas from the Middle East, making the economy particularly vulnerable to prolonged disruptions in energy flows. India (-11.3%) ended sharply lower as surging oil prices intensified foreign outflows, stoked inflation fears, and darkened the economic outlook for the world's third-largest crude oil importer.

In EMEA (-6.7%), Saudi Arabia (+4.8%) advanced as Brent crude eclipsed US$100 per barrel, offsetting a 50% decline in oil exports in March due to Iran’s blockade on shipments through the Strait of Hormuz. To alleviate global oil shortages, Saudi Arabia began diverting over four million barrels per day (bpd) of oil to its Yanbu port in the Red Sea, a huge increase from previous levels, but still well below the roughly 20 million bpd that previously flowed through the Strait of Hormuz. South Africa’s (-12.3%) central bank kept its policy rate at 6.75% as annual consumer inflation eased to 3% in February, but policymakers were cautious of the inflationary impact of rising energy costs.

In Latin America (-1.8%), Brazil’s (-0.3%) central bank eased monetary policy with a modest cut of 25 bps to the benchmark Selic rate, to 14.75% but lifted its 2026 inflation forecast from 3.4% to 3.9% due to rising energy prices. The government is preparing a provisional measure that would provide 15 billion reais (US$2.9 billion) in credit to support companies struggling with the impact of US tariffs and the war in the Middle East. Mexico’s (-3.9%) annual inflation increased more than expected to 4.02% in February, surpassing the central bank’s 3.0% target and increasing the likelihood that further interest-rate cuts would be delayed.

Fixed Income

Military actions in the Middle East triggered concerns about inflation and energy costs and flows, driving global sovereign yields higher. Fixed income sectors posted mixed excess returns, as credit spreads widened amid mounting uncertainty. The RBA raised rates by 25 bps, driven by sticky inflation and the risk of higher global energy prices due to the Middle East conflict. Most other major central banks held policy rates unchanged. According to Bloomberg, the US Aggregate Index returned -1.76% for the month, underperforming duration-equivalent Treasuries by 0.10%. The Global Aggregate Index returned -1.78% in US-dollar hedged terms, underperforming duration-equivalent government bonds by 0.17%.

Global sovereign yields spiked as rising energy prices and escalating geopolitical tensions lifted inflation expectations, prompting investors to reassess the timing and extent of monetary easing. In the US, Treasury yields rose across the curve, led by the front end, as higher oil prices challenged the disinflation narrative, and resilient US economic growth reduced the urgency for Fed rate cuts. In the euro area, Bund yields rose meaningfully, reflecting higher inflation expectations given the region’s sensitivity to imported energy. UK gilts underperformed, with yields reaching pre-global financial crisis highs amid persistent inflation, fiscal concerns, and elevated risk premia. Across Asia Pacific, Japanese yields moved higher as rising global yields and energy-driven inflation pressures supported expectations of continued policy normalization by the BOJ. Australian yields increased in tandem with global markets, with higher energy prices adding to already solid domestic inflation pressures. EM yields climbed due to rising US yields, a stronger US dollar, and domestic inflation pressures from weak currencies and higher oil prices. South Africa was among the weakest performers, and across Latin America, yields rose in line with global trends.

US investment-grade corporate bonds posted negative returns and underperformed duration-matched Treasuries, with weakness led by financials and industrials, while utilities outperformed. High yield also declined, though performance across ratings was mixed, led by B rated bonds, followed by CCC and BB. Sector results favored technology, energy, and cable & satellite, while paper, building materials, and consumer products lagged. Globally, credit underperformed government bonds as spreads widened, with similar patterns across US-dollar, euro, and sterling markets. In EM, local debt trailed external debt amid currency depreciation and rising local rates, while higher US Treasury yields and wider spreads weighed on external bonds. Within securitized assets, agency mortgage-backed securities outperformed, whereas collateralized-mortgage-backed and asset-backed securities underperformed.

Currencies

The US dollar strengthened through March and outperformed all G10 peers, supported by firmer real-rate differentials and renewed safe-haven demand. The repricing of Fed expectations toward a “higher-for-longer” policy path further underpinned US-dollar strength. European currencies, particularly the euro and Swedish krona, led G10 declines, reflecting the region’s greater vulnerability to higher energy prices. The Japanese yen weakened despite the risk-off backdrop due to yield differentials. EM currencies depreciated broadly, especially those of oil-importing nations. A stronger US dollar and rising US yields further tightened external financing conditions. In Asia, currencies weakened as terms-of-trade shocks, capital outflow pressures, and policy constraints limited central banks’ ability to respond aggressively.

Commodities

Commodities (+24.5%) rallied in March, led by a surge in energy, with additional support from agriculture & livestock. Precious and industrial metals weighed on overall performance.

Energy (+53.4%) skyrocketed during the month. Gas oil (+84.0%), heating oil (+70.4%), crude oil (+52.2%), and gasoline (+42.7%) soared as escalating conflict in the Middle East triggered one of the largest supply disruptions in recent history, with oil flows through the Strait of Hormuz severely disrupted. The effective loss of millions of barrels per day, combined with attacks on energy infrastructure, drove a sharp rise in geopolitical risk premiums across crude and refined products. Emergency reserve releases helped limit further upside, but prices still recorded their strongest monthly gains on record due to considerable uncertainty over supply restoration. Natural gas (+1.0%) rose modestly as strong liquefied natural gas export demand and higher oil prices supported the market, while a slightly cooler near‑term weather outlook added incremental heating demand.

Industrial metals (-0.2%) fell modestly during the month. Aluminum (+12.3%) rose as global supplies tightened due to shipping constraints through the Strait of Hormuz, damage to Gulf smelting, and ongoing production restrictions in China over energy and environmental issues. Higher energy costs, low inventories, and steady demand from infrastructure, defense, and clean-energy sectors further boosted prices. Zinc (-2.2%) and nickel (-4.2%) fell as near‑term demand softened and inventories rebuilt. The drop was intensified by strength in the US dollar and increased risk aversion, while nickel faced further downward pressure from ongoing worries about oversupply related to production in Indonesia. Lead (-3.7%) declined as battery‑sector demand softened, particularly in automotive replacement, while ample primary and secondary supply, rising recycling volumes, and sufficient inventories also weighed on prices. Copper (-7.6%) was dragged down by concerns about global growth, weak demand in China, high inventories, and risk-off sentiment from Middle East tensions.

Precious metals (-12.3%) ended sharply lower. Silver (-19.4%) and gold (-11.2%) slid as surging oil prices fueled inflation fears, pushing US Treasury yields and the US dollar higher, and reducing expectations for interest-rate cuts by the Fed in the near term, which weighed on non‑yielding assets. The decline was amplified by profit taking and liquidity‑driven selling after significant rallies earlier this year, while silver fell more steeply due to its greater exposure to cyclical and industrial demand.

Agriculture & livestock (+3.8%) rose. Cocoa (+14.6%) surged as renewed drought concerns and insufficient rainfall in key West African producing regions generated fears about near‑term supply, while slower port deliveries and higher shipping and input costs added further upward pressure on prices. Sugar (+12.1%) climbed as soaring crude oil prices boosted ethanol’s appeal and encouraged mills, particularly in Brazil, to divert cane toward ethanol production. Additionally, trade disruptions and logistics constraints reduced the availability of refined sugar and supported prices. Cotton (+7.0%) was bolstered by growing supply constraints from widespread US drought conditions and planting uncertainty. Corn (+2.4%) was driven higher by strong US exports and higher energy prices, in addition to anxiety about tighter supplies due to smaller 2026 planting acreage and weather delays. Soybeans (+0.3%) increased as higher crude oil prices lifted soybean oil values and biofuel demand expectations. Lean hogs (-4.5%) declined as higher-than-expected slaughter levels and rising pork supplies pressured prices, while weaker pork cutout values signaled softening wholesale demand.