Market Update: Staying Grounded Through Volatility

Recent global developments have introduced a period of heightened sensitivity across financial markets, particularly within energy prices and interest rate expectations. In environments like this, where headlines evolve quickly and market reactions can feel abrupt, it is important to step back and focus on the underlying drivers.

As we approach quarter-end, we are offering our current perspective on these dynamics and how they are influencing portfolio positioning. To provide insight into our active management process, we are sharing a “behind-the-scenes” look at our internal investment dialogue. The highlights below are curated from our team’s real-time communications—including Joel Heymsfeld’s “What I See” daily notes and our Tuesday Investment Calls. This live perspective illustrates how we work to distinguish short-term market noise from the long-term economic shifts that drive portfolio strategy.

March Highlights from Our Daily Investment Discussions

Phase 1: Initial Impact & Energy Focus
• March 2: Conflict begins; oil prices surge ~8% in a day, with focus on potential disruption to the Strait of Hormuz and global energy supply.
• March 3: Market reactions to the conflict have been uneven, with U.S. equities holding relatively steady while global bonds and international stocks experienced more volatility alongside rising energy prices. The Strait of Hormuz remains a key focal point, given its importance to global oil flows, though the U.S. is better insulated due to its domestic production and export capacity. In contrast, Europe remains more vulnerable given its reliance on imported energy. Iran appears increasingly isolated geopolitically, which may limit its ability to sustain prolonged disruption to global energy markets.
• March 4: Despite headlines, U.S. equity markets remain relatively stable, reflecting America’s stronger energy position and economic resilience.
• March 5: Signs emerge that Iran’s military activity is weakening, with reduced missile and drone attacks and increased international opposition.

Phase 2: Assessing Broad Economic Data
• March 6: China lowers its growth target—highlighting ongoing structural weakness in its economy, separate from geopolitical tensions.
• March 9: Labor market data softens modestly; payrolls decline, but the broader trend remains a gradual slowdown rather than deterioration.
• March 10: Markets have experienced increased volatility, particularly in energy, though the U.S. has remained relatively resilient compared to Europe and emerging markets, given its position as a net energy exporter. Within portfolios, company-specific fundamentals continue to matter—Broadcom’s AI-driven growth and Vertex’s positive clinical data reinforce confidence in key holdings. The AI investment theme is also broadening beyond semiconductors into infrastructure, benefiting companies tied to power and data center buildout.
• March 11: Global oil supply disruptions estimated at 11–14 million barrels/day, though strategic reserves and rerouting may offset some impact.
• March 12: Attention turns to Iran’s internal pressures, including a worsening water crisis that could impact its ability to sustain conflict.
• March 13: Pre-war inflation remains above the Fed’s target, reinforcing expectations that rate cuts may be delayed.

Phase 3: Sentiment Shifts & De-escalation
• March 16: Early signs of potential de-escalation emerge, including diplomatic discussions and limited targeting of energy infrastructure.
• March 17: Investor sentiment has turned notably cautious, with individual investors the most bearish since last November and global fund managers raising cash levels amid concerns about Iran and credit markets. Despite this shift in tone, recession fears remain low, with most investors still expecting a soft or no landing and maintaining equity exposure—particularly in emerging markets and Japan. Geopolitical uncertainty increased with the postponement of the Trump–Xi meeting, though conditions in the Strait of Hormuz appear less severe than initially feared, with oil still flowing and key infrastructure largely intact. Overall, markets are reflecting a more cautious outlook, but not one signaling broad capitulation.
• March 18: The Fed holds rates steady; outlook suggests only modest easing ahead as inflation risks remain elevated.
• March 19: Markets interpret the Fed as cautiously supportive, with the economy still on stable footing despite energy-driven inflation risks.
• March 20: While indications of de-escalation surface alongside rising political pressure on energy prices, markets sell off heading into the close, reflecting a “de-risking” sentiment. Few investors are willing to hold aggressive positions amid uncertain headlines over the weekend.
• March 23: Reports of “productive talks” trigger a sharp early market rebound, reinforcing how quickly sentiment can shift on geopolitical developments.

The markets are doing what they are designed to do—continuously processing new information and adjusting expectations in real time. While the headlines can feel dramatic, the underlying economic backdrop remains intact, and importantly, the range of potential outcomes continues to evolve—not deteriorate in a straight line.

To help put recent moves in context, the table below compares the current environment to historical market (S&P 500) “pullbacks” and “corrections.”

Market Event	Decline (from High)	Historical Frequency	Avg. Recovery Time	Current Status (March 2026)
Pullback	5% to 10%	~Once a year	~1–2 months	Current Level (~7% as of Friday)
Correction	10% to 20%	Every ~2 years	~4 months	Not reached
Bear Market	20% or more	Every ~7 years	~15 months	Not reached

Our role in environments like this is not to react to every development, but to stay disciplined: maintaining thoughtful diversification, selectively upgrading portfolios where opportunities emerge, and keeping a long-term lens on behalf of our clients. As always, we will continue to monitor conditions closely, but our focus remains consistent: staying invested, staying patient, and focusing on the fundamentals that drive long-term outcomes.

We are here to provide support and clarity as these events unfold. Please do not hesitate to reach out if you would like to discuss how these developments relate to your portfolio or specific financial goals.

Sincerely,
Brett Shaver
On behalf of the Princeton Global Investment Team