BY STRATEGIC ADVISERS INVESTMENT TEAM — MARCH, 2026
Market Conditions
Conflict in the Middle East led to volatility in global stock markets and energy prices. However, the U.S. economy expanded in 2025 and fourth quarter earnings growth remained strong. Meanwhile, U.S. personal spending continued to rise through December 2025, as services such as housing, utilities and health care saw strong demand.1 Job growth in February was weaker than expected.
- GDP grew during the fourth quarter of 2025 despite slower government spending due to the shutdown in the fall. Additionally, for the full year of 2025 the US economy expanded 2.2%, marking the fifth straight year of positive growth.2
- Earnings season look ahead: For Q1 2026, the estimated earnings growth rate (year-over-year) for the S&P 500 is 11.5%. If Q1 earnings grow at that pace, that would mark the sixth-straight quarter of double-digit earnings growth (year-over-year) for the index.3
- The most recent jobs report came in weaker than expected with the economy shedding 92,000 jobs in February. While this bears watching over the coming months, the overall unemployment rate remains low compared to its long-term history.4
What it may mean for your portfolio
The conflict in Iran is upending the lives of many civilians in the Middle East. The situation also roiled energy and global stock markets, which likely led to anxiety for some investors. While conflicts can feel distressing, they have not led to lasting market contractions historically. In fact, stocks have typically gone on to make new highs just a few months after the start of most conflicts.
When significant news events take place overseas, some investors may wonder if international stocks are more at risk. With dozens of markets and thousands of companies all around the world, not all economies or businesses will be impacted the same way by this conflict. So, a broad reduction in exposure to international stocks may be unwarranted. We believe that a well-diversified portfolio of international stocks may potentially recover from recent volatility.
Supporting our view for both U.S. and international stocks is a positive outlook for economic growth for most major economies around the world. Corporate profit expectations are also positive for global stocks. Growing economies and rising corporate profits have historically led to rising stock markets over the long run, even through bouts of volatility.
As for higher oil prices stemming from the situation in Iran, those can impact gasoline prices for drivers in the U.S. However, the typical household spends just about 3% of its budget on gasoline. Rising gas prices may be stressful for some consumers but are unlikely to meaningfully slow the U.S. economy in the near-term. However, if oil prices remain unusually high for a longer period of time, that may lead to a more modest growth outlook for the U.S. economy.
Outlook
Military conflicts can lead to market volatility, as well as uncertainty for investors. While every situation is different, historically, markets tend to rise within months of a conflict breaking out. With the economy still growing, positive earnings growth expectations, and a solid employment picture, there is potential for gains later in 2026. The “low-hire, low-fire” trend in the labor market has been a key driver of the continued economic expansion. Additionally, strong consumer spending serves as the primary engine for U.S. economic growth, job creation, and business revenue. At the same time, we continue to closely watch for signs of further weakness. Periods of volatility may occur for various reasons. However, a focus on diversification may help investors experience smoother investment returns over time.
We continue to monitor and research developments in the economy, corporate earnings, policy changes, and geopolitical events. Developments in Iran are shifting day-to-day, and we are closely following events as they unfold. We believe the risk of imminent recession remains low. However, we are prepared to act as the situation evolves.
Stick with your plan and stay invested
Market conditions can change quickly. Historically, the market has shown resilience even when news headlines may feel discouraging. We aim to guide clients through varying market conditions, including those that have seen strong performance over the past three years. As a result, we have maintained healthy exposure to stocks, even during bouts of market volatility. We believe that staying invested and managing risk through evolving market conditions can ultimately help you reach your financial goals in the long run.
