March Monthly Market Update

The February market landscape offered a mix of steady economic growth, rising inflation pressure, and shifting investor sentiment. Stocks remained near record highs, but day-to-day volatility increased as investors weighed strong earnings against persistent inflation and geopolitical uncertainty. Below is a clear breakdown of what moved markets and what these trends may mean moving forward.

Major U.S. Stock Indices

February delivered a stress test for equity markets as investors rotated out of mega-cap technology stocks and into sectors such as industrials, materials, and consumer staples. The result was a wide dispersion in performance across major indices.

• The S&P 500 declined 0.87%.
• The Nasdaq 100 fell 2.32% as software and AI-driven names experienced notable volatility.
• The Dow Jones Industrial Average finished up 0.17%, supported by strength in economically sensitive sectors.

The Economy: Growth Holds, Inflation Persists

Economic momentum carried into 2026, with January data showing 130,000 new jobs added and unemployment edging down to 4.3%. Despite this solid backdrop, inflation proved stubborn. Consumer prices, producer prices, and core Personal Consumption Expenditures (PCE) all moved higher, with core PCE reaching 3.0%. The combination of steady growth and lingering inflation has kept investors on alert.

The Federal Reserve: Staying Patient

With inflation not yet easing decisively, the Federal Reserve remains cautious. Markets currently see minimal likelihood of a rate cut in March. Instead, expectations have shifted toward one or two modest cuts later in 2026—contingent on inflation resuming its downward trend. For now, the Fed appears content to maintain its current stance.

Stocks: Strong Earnings but a More Selective Market

Corporate earnings continued to impress, with Q4 2025 marking the fifth consecutive quarter of double-digit profit growth and early 2026 estimates pointing to another strong year. However, the market has become increasingly selective. Energy, materials, and industrials led performance in February, while large AI-focused companies delivered strong results but saw more erratic trading. Earnings strength alone is no longer a guarantee of outperformance—sector positioning has taken on greater importance.

Interest Rates: Short-Term Yields Rise, Long-Term Yields Slip

The bond market delivered an unusual pattern in February as short-term rates crept higher on expectations of a steady Fed, while long-term yields fell, pushing the 10-year Treasury below 4%. This split reflects investor caution and a growing demand for safety. For investors, it also means short-term fixed income and money market instruments continue to offer appealing income opportunities.

Foreign Policy: Rising Tensions in the Middle East

Global markets were rattled late in the month following joint U.S. and Israeli strikes on Iran on February 28. Iran responded militarily, effectively closing the Strait of Hormuz and causing oil prices to rise. Equity markets reacted with heightened volatility as investors assessed the potential economic implications. While the long-term impact remains unclear, the geopolitical backdrop is likely to contribute to continued market swings.

Putting It All Together

February reinforced that strong economic and corporate fundamentals can coexist with meaningful volatility. Inflation remains the key obstacle for monetary policy, and shifting sector leadership has made the market more selective. Geopolitical developments added another layer of uncertainty, reminding investors of the importance of staying informed and focused on long-term strategy.

If you have questions about how these trends may affect your portfolio or would like to discuss positioning in today’s environment, our team at LGH Wealth Management is here to help.