Economic Update 3-30-2026

Economic data for the week included a slight gain in manufacturing PMI, but a minor decline in services PMI, although both remained in expansionary mode. Construction spending also fell back, as did consumer sentiment.

Equities were mixed around the world last week, with declines in the U.S. but gains in developed Europe and Asia. Bonds fell back as well, along with rising interest rates. Commodities were led higher by energy and industrial metals prices.

U.S. large cap stocks fell back for yet another week, with the Nasdaq reaching -10% correction territory from the recent peak on Feb. 25. The S&P 500 is close to correction at just over -8%. By sector, energy again led (up 6%), followed by materials (4%) and utilities (3%); these were offset by declines in communications (-7%) and technology (-3%). Interestingly, small cap stocks saw gains, to trim their year-to-date declines to minimal.

(While -10% corrections can be unnerving at the time, from a historical perspective, they’ve tended to occur once every 1-2 years. More severe -20% corrections have happened every 5-7 years on average, coinciding with more extensive economic concerns, such as recessions.)

Markets started sharply higher Monday after the U.S. administration offered several back-and-forth announcements concerning the Iranian conflict, finally announcing a temporary pause on military strikes against Iranian energy infrastructure—seen as a positive to progress toward an end to the conflict but also the stoppage of taking additional oil off the market. The rest of the week echoed the market’s back-and-forth sentiment surrounding changing prospects for a more permanent end to the conflict. Thursday, for example, featured a warning from the U.S. administration to Iran, to “get serious” about a deal before it’s “too late,” which caused sentiment to drop, along with additional concerns in the technology space.

As has been the case all month, the primary pressure valve for this uncertainty has been oil prices, now moving into distillate products made from petroleum. Markets appear to continue to view the conflict as temporary, by not pricing in economic slowdown, as might be implied through a deeper equity price correction (as in -10% perhaps deepening to -20%). Equity prices so far have laid out the assumptions—in that Europe and Asia continue to face a stronger negative response from Middle East oil reliance, while the U.S. has remains more insulated. Nevertheless, higher oil prices ultimately would make their way through all global economic activity, although the world is less oil-intensive than it was in the mid-1970s, which is the comparative that everyone has been using. The best case is that both sides might be looking for a graceful ‘off-ramp’ to the conflict. As one example, Goldman Sachs has used a benchmark of a 10% rise in oil prices corresponding to a 0.2% rise in headline inflation, and -0.1% decline in global GDP, after netting out the various impacts on income and spending in various countries.

Foreign stocks were mixed, despite the headwind of the U.S. dollar strengthening by a fraction of a percent, with developed markets seeing positive returns, led by the U.K. The chances of a European central bank hike have risen in recent weeks, as energy prices have translated to inflation, although, as in the U.S., that could depend on potential economic damage that would normally push policymakers towards cuts. Emerging markets came in negative on net, with gains in commodity-oriented Brazil, Mexico, and South Africa offset by declines in India, South Korea, and China. Both developed and emerging markets had reached -10% correction territory as well, due to the uncertainty surrounding their higher dependence on Middle East oil, especially across Asia. The possibility of energy price caps exists as a form of fiscal stimulus if the current situation continues, although that has other side effects (by neutralizing the usual demand destruction response created by higher prices).

Bonds fell back a fraction of a percent last week as well, with yields ticking up across the longer end of the U.S. Treasury curve, along with higher inflation concerns, which would keep the Fed and other central banks from hoped-for rate cuts. While bond sectors performed similarly for the most part, international lagged, especially on the unhedged developed market side, due to the stronger dollar during the week.

Commodities saw gains overall, led by rising prices in industrial metals and energy, which offset a continued pullback in precious metals. The most obvious asset related to the U.S.-Iran conflict, Brent crude closed up last week by less than a percent to $113/barrel, while West Texas crude oil gained 2% to over $100/barrel. Despite the reputation of being seen as an inflation and geopolitical ‘flight to safety’ hedge, gold has been pulled down by the competition of higher U.S. Treasury interest rates and strengthening dollar.

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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.