Economic Update 3-09-2026

Economic data for the week included improvements in manufacturing and services surveys, flattish retail sales, and disappointing nonfarm payrolls. Several of these were influenced by weather and idiosyncratic factors.

Equities fell back strongly across the globe, more internationally than in the U.S., with the military actions in the Middle East weighing on sentiment.  Bonds also fell back along with rising yields as higher energy prices stoked inflation fears. Commodities saw strong gains, led by the most dramatic single-week move for crude oil in decades.

U.S. stocks began the week with a fairly benign response on Monday after the prior weekend’s joint U.S.-Israel attacks on Iran. However, Tuesday saw a rapid deterioration in sentiment as attacks on both Iran and Lebanon intensified, along with Iran’s threats to close the Strait of Hormuz, which is one of their main remaining tactical threat tools (via stealthier means, as their navy was decimated). Economic data was mixed, with decent ISM results coupled with a weaker nonfarm payroll report. The key questions in a nutshell: (1) How much damage and/or disruption, at the very least, will be absorbed by oil infrastructure in the Middle East, (2) How long will the conflict last, and (3) What will the new reality look like?

By sector, only energy saw minor gains, while declines were most pronounced in cyclical materials stocks (-7%), but also consumer staples, health care, and industrials (all nearly -5%), with concerns over energy price impacts on inflation. Real estate fell back by 2% upon higher interest rates.

Foreign stocks fared worse than the U.S., with more local energy supply sensitivity to the Middle East conflict. All key developed regions and emerging markets were down in the -5% to -7% range, with little differentiation between groups during the dramatic sell-off. Emerging markets were down across the board as well, with China and India faring a bit better than South Korea and South Africa, the latter of which have suffered from greater volatility in both directions more recently due to sector-specific factors. From their highs on Feb. 25, U.S. stocks (as represented by the S&P 500) are only down -3% on net, while foreign stocks (MSCI EAFE) have fallen back by -7%.

Bonds fell back on the week, as higher energy prices resulted in inflation fears, and correspondingly higher yields. Along with rising rates, floating rate bank loans were the only group that ended positively. A stronger dollar held back unhedged foreign bonds to a greater degree.

Commodities experienced a historic week, with the GSCI index up over 15%. Energy prices jumped dramatically due to uncertainty surrounding the near-term outcome of the U.S.-Israel-Iran military action, which include reduced shipments through the Strait of Hormuz and Iranian attacks on oil infrastructure of neighbors. West Texas crude oil spot prices jumped 35% on the week to $91/barrel, representing the biggest single-week surge since 1985. With the threat of the Strait of Hormuz closing, and bottled-up ship traffic, being a chokepoint for not only crude oil but also natural gas, prices for the latter in Europe jumped by 40% Tues. morning alone. The commodities asset class has proven its worth as a unique diversifier during a time of international crisis, as it has historically, with the forward path for energy prices in particular cloudy and dependent on a final resolution to the conflict of uncertain length. Interestingly, gold fell back by a few percent despite a usual hedge against military activity, due to already high long positioning, while more speculative silver, palladium, and platinum prices fell back by nearly -10% for the week.

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Sources:  LSA Portfolio Analytics, American Association for Individual Investors (AAII), Associated Press, Barclays Capital, Bloomberg, Deutsche Bank, FactSet, Financial Times, Goldman Sachs, JPMorgan Asset Management, Kiplinger’s, Marketfield Asset Management, Minyanville, Morgan Stanley, MSCI, Morningstar, Northern Trust, Oppenheimer Funds, Payden & Rygel, PIMCO, Rafferty Capital Markets, LLC, Schroder’s, Standard & Poor’s, The Conference Board, Thomson Reuters, U.S. Bureau of Economic Analysis, U.S. Federal Reserve, Wells Capital Management, Yahoo!, Zacks Investment Research.  Index performance is shown as total return, which includes dividends, with the exception of MSCI-EM, which is quoted as price return/excluding dividends.  Performance for the MSCI-EAFE and MSCI-EM indexes is quoted in U.S. Dollar investor terms.

The information above has been obtained from sources considered reliable, but no representation is made as to its completeness, accuracy or timeliness.  All information and opinions expressed are subject to change without notice.  Information provided in this report is not intended to be, and should not be construed as, investment, legal or tax advice; and does not constitute an offer, or a solicitation of any offer, to buy or sell any security, investment or other product.