March Market Recap
· Monthly Recap · 5 min read
By Victor Chen
Top Global News Events
US-Israel-Iran at War. Ayatollah is dead. Market is dead?
The Middle East conflict escalated from tension into a full energy shock. Tanker traffic through the Strait of Hormuz, the waterway that carries roughly a fifth of the world's oil, was suspended, Gulf export facilities were hit, and Brent crude jumped about 15% to $83 within the first week of March. The IEA called it the largest supply disruption in the history of the oil market, and it set the path of inflation and Fed policy for the rest of the month.
US, EU, and Japan move toward a plan to break Chinese dominance in Rare Earth Minerals
With China's export licensing still the binding constraint on rare earths and magnets, the US, EU, and Japan advanced a coordinated plan to build separation and refining capacity outside China. The move matters less for the metals in the ground than for who controls the processing step the entire supply chain runs through.
Trump tariffs struck down by US Supreme Court. What's next?
After February's ruling against the emergency tariffs, the administration fell back on a 150-day 10% tariff under Section 122 and opened Section 301 investigations into 16 trading partners, with a July deadline. President Trump landed in Beijing on March 31, the first US presidential visit since 2017, with rare earths and trade on the table. The pressure did not end. It changed shape.
FOMC
The FOMC met on March 17–18 and held the federal funds target range at 3.50%–3.75% for a third consecutive meeting. The decision itself was widely expected. The more important signal came from the projections and the Chair's commentary. Fed Chair Jerome Powell noted that the implications of the Middle East conflict for the US economy remained uncertain, and that while progress on inflation was still expected, it would be slower than the Fed had hoped. The updated dot plot showed only one 25-basis-point cut penciled in for all of 2026, a more hawkish path than markets had positioned for. By month-end, futures pricing had moved further, with many participants expecting no cut at all this year.
The reason is straightforward. An oil shock pushes inflation up at the same time it threatens growth, which is the exact bind a central bank least wants to face. Cutting rates into rising energy prices risks reigniting the inflation the Fed spent two years bringing down. Holding rates while growth slows risks tightening into weakness. For now the committee is choosing patience, and the soft-landing strategy described in earlier months is being tested by a variable the Fed does not control.
The leadership transition also moved closer. Chair Powell's term ends on May 15, and President Trump has confirmed Kevin Warsh as his intended successor. The contrast set out in earlier recaps still holds: Powell's data-driven caution against Warsh's more hawkish, growth-oriented posture. Markets will spend the spring weighing what a Warsh-led Fed means for the rate path, and an active energy shock makes that handover more consequential than a routine one.
Market Recap
Index Performance
S&P 500: -5.0% to -5.5%
Nasdaq: -4.5% to -5.2%
Dow Jones: -5.5% to -6.0%
A Broad Correction, Led From the Top
March was the month the war reached Wall Street. All three major US indexes fell to multi-month lows, and by the final week the Dow had confirmed a move into correction territory, defined as a decline of at least 10% from its recent high. The selling ran for five consecutive weeks. This was not a tech-specific stumble like February's mega-cap rotation. It was a broad, macro-driven repricing, with the heaviest damage in the rate- and growth-sensitive corners of the market: technology, consumer discretionary, and financials.
The pattern is a useful counterpoint to February. Two months ago the lesson was that mega-cap tech does not always lead and that emerging markets can carry a portfolio when US large caps wobble. March delivered the harder version of that lesson. When a real macro shock hits, correlation rises and most equities fall together, regardless of sector or geography. Diversification softens the blow in a correction like this one. It does not erase it.
Where the Hedges Worked
The portfolio insurance that paid off in March was the unglamorous kind. Energy was the standout, lifted directly by the oil move, with energy names broadly hitting fresh highs even as the index sold off. Defensive sectors with non-cyclical demand, particularly utilities and consumer staples, held up far better than the market. Consumer sentiment told the other side of the story, with the University of Michigan index dropping to 53.3 from 56.6 in February as households absorbed higher gas prices and volatile markets.
This is the practical case for a real allocation to "boring" exposure. Energy and defensives are easy to ignore in a year when AI headlines dominate, and easy to underweight when they lag a tech-led rally. March is the reminder of why they earn their place: the month they matter most is the month nothing else works.
In conclusion, the theme of March is the supply shock. February taught that a good portfolio is a diverse portfolio. March added the harder corollary: even a diverse portfolio can have a bad month when the disruption hits a point everyone depends on and almost no one owns directly. The job is not to predict the next Strait of Hormuz. It is to build a portfolio that does not depend on there never being one, while holding enough energy and defensive exposure that a shock month is survivable rather than ruinous.