Escalate Or De-Escalate?

*Analyzing the markets with Richie Naso, a Wall Street veteran of over 40 years and former member of the NYSE.

• DJIA 52-wk: +12.22% | YTD: -3.13% | Weekly: -1.99%
• S&P 500 52-wk: +17.61% | YTD: -3.12% | Weekly: -1.60%
• NASDAQ 52-wk: +24.51% | YTD: -4.89% | Weekly: -1.26%
• State St. Indus. Select SPDR ETF 52-wk: +25.56% | YTD: +6.14% | Weekly: -3.11%

Major indexes finished lower for the third consecutive week, pressured by geopolitical risks, higher oil prices, and shifting interest-rate expectations. AP News

1. Oil Shock From Middle East Conflict
Oil prices surged above $100 per barrel during the week.
The move was tied to escalating conflict involving Iran and concerns about disruptions to global supply.
Rising energy prices revived inflation fears and weighed on equities.-Barron’s

Higher oil typically pressures markets because it:

• pushes inflation expectations higher
• raises costs for businesses
• reduces odds of near-term Fed rate cuts
  

2. Weak Economic Signals
Several data points suggested economic momentum may be slowing:

• Payroll data showed job losses of 92,000, pushing unemployment to 4.4%.
• GDP estimates were revised lower.
• Treasury yields climbed toward 4.15% on the 10-year as inflation expectations rose. -Chatham Financial Barron’s

The combination sparked stagflation worries (slow growth + inflation).

3. Fed Rate-Cut Expectations Shift
Markets began the week expecting about 60 bps of rate cuts in 2026, but that expectation was reduced to around 44 bps after the energy shock and inflation concerns. -Highland Assoc.

Less Fed easing = pressure on equities, especially high-valuation growth stocks.

4. Sector Rotation

Winners:

• Energy (benefiting from oil spike)
• Utilities and defensive sectors

Losers:

• Financials
• Consumer discretionary
• Industrials

Energy stocks gained 2% for the week, while financials fell more than 3%.

Notable Themes Traders Watched:

1. Volatility rising
VIX surged earlier in March as geopolitical risk increased.

2. AI narrative shifting
Some rotation out of mega-cap tech after reports that AI could disrupt employment and valuations. -Chatham Financial

3. Energy vs. growth trade
Energy companies and natural-gas-heavy firms outperformed the broader market. -WSJ

Big Picture:

The S&P 500 is 5% below its recent high.
Nasdaq is down roughly 5% year-to-date, the weakest major index.
Markets are increasingly sensitive to oil, inflation, and Fed policy signals.

Bottom Line:
Last week was a macro-driven pullback. Rising oil prices, geopolitical tension, and reduced expectations for Fed rate cuts pushed equities lower despite otherwise stable corporate fundamentals.

Weekly Snapshot

• The Russell 2000 Index traded volatile but relatively resilient compared with large-cap indexes.
• The index hit its lowest close of 2026 late in the week as oil-driven inflation fears hit equities broadly. -Reuters
• Despite the pullback, the Russell remains one of the better-performing major indexes in early 2026. -AP News

“This week the Nasdaq tested its 200-day simple moving average from above, found support there, and closed flat on the week,” Seeking Alpha analyst Alex King of Cestrian Capital Research said. King added that “if you delete the words ‘Hormuz’ and ‘Strait Of’ from your consciousness, you will find that typically such a thing is bullish.”

Why I'm Still Expecting Double-Digit Gains This Year, Despite Recent Volatility:

As for the Middle East conflict — it's important to know that geopolitical events and conflicts usually only have a short-term impact on the market. In fact, over the last 40 years of geopolitical shocks, markets usually bounce back quite fast. And historically, they are typically higher 12 months later. Same goes for 6 months. Even the 3-month outlook leans positive.

So, it's important to keep your eyes on the big picture.

The Market Is Down, but People Are Still Buying Stocks. Here’s What They’re Loading Up On:

Key Points About This Summary

• Retail investors bought $178 million of Nvidia and $49 million of Oracle, among other AI stocks, despite existing AI-related concerns.
• Overall retail investor purchases decelerated by 30% last week, with ETF inflows down 22% and significant net selling in single stocks.
• Amid a dismal March with the S&P 500 down nearly 3%, retail investors unloaded energy stocks like Exxon, which saw $62 million in outflows.

As stocks extended their declines Thursday, continuing a dismal start to March, J.P. Morgan’s weekly report on retail trading shows what non-institutional investors are actually buying.

Notably they are bullish on technology mega stocks such as Oracle along with AI stocks in general. Those include shares of companies like Okta, Nvidia, AMD, and Micron, among others.

On Tuesday, the day Oracle reported earnings, retail investors bought $49 million of the stock. They also purchased $3.5 million of Okta on March 5, $178 million of Nvidia on March 6, $59 million of AMD on March 6, and $16 million of Micron on March 9.

The purchases come despite “existing AI-related concerns spilling into equity and credit markets,” the analysts wrote in a Thursday roundup of stock moves by retail investors for the seven days ending on Wednesday, March 11.

But overall retail investors are buying less, with weekly purchases decelerating around 30% over the past week. “Amid uncertainty around the war, retail investors chose to reduce their weekly ETF inflows by 22%,” the analysts added. They also cut back on buying single stocks, with this past Monday marking “the largest net-selling day in single stocks in a month.”

Energy is one sector they’re unloading as the Iran war intensifies and the effective closure of the Strait of Hormuz has sent oil prices above $100 a barrel. The heaviest outflows were from Exxon, with $62 million in outflows for the week, and State Street Energy Select Sector SPDR exchange-traded fund, among others.

Retail investors moved money out of the ETF that tracks major energy companies, known as the XLE, while there were “unprecedented” inflows into United States Oil Fund, the ETF tracking the price of U.S. benchmark crude oil itself.

March has been a rough month for the stock market, with the S&P 500 down nearly 3% and the Dow Jones Industrial Average off more than 4%. On Thursday, both indexes were dow by about 1.5%. The U.S. attacked Iran at the end of February, and the lack of a clear endpoint for the conflict has rattled investors.

REITs Are a Safe Place to Hide From Iran and AI

Real estate investment trusts are suddenly a haven in a market dominated by fears about Iran, rising oil prices, and the unwinding of the artificial-intelligence trade. Investors are flocking to them for the physical assets they own—and the very real dividends they pay.

The State Street Real Estate Select Sector SPDR exchange-traded fund is up nearly 4.5% this year, while the S&P 500 index has slid more than 2%. “REITs have long been ignored, but they are finally getting their day in the sun,” said Iman Brivanlou, senior portfolio manager for the TCW Real Estate equity strategy.

REITs are in a sweet spot. With inflation still a concern, REITs should benefit, Brivanlou argues, since property values and rental income tend to go up along with consumer prices. But with many economists also predicting that the Federal Reserve will resume its interest-rate cutting cycle later this year, that could also stimulate the economy and make the dividends that REITs pay out more attractive as well. The average yield for the stocks in the State Street ETF is 3.3%.

“REITs still look like good bond proxies,” Brivanlou says. “They are an inflation hedge, and they have an advantage because of the dividend yield.”

Brivanlou likes wireless infrastructure companies American Tower, SBA Communications, and Crown Castle, which he thinks will benefit from the continued rollout of AI services. SBA has a dividend yield of 2.7% while American Tower and Crown Castle yield 3.8% and 4.9%, respectively.

REITs focusing on senior-living centers might also be a good bet. Brivanlou likes Welltower, which yields only 1.4%, as a demographics play—a bet that America’s aging population will need more medical care. Adrian Helfert, chief investment officer of Westwood, points to Welltower competitor Ventas, which the firm owns in its Westwood Enhanced Income Opportunity ETF.

The Westwood ETF also owns two other REITs as top holdings, storage warehousing firm Prologis and apartment rental company Essex Property Trust, which should get a lift from the fact that home buying remains out of reach for many people. Helfert argues that the three companies benefit from being able to lock in tenants for longer periods. “These stocks have better transparency of cash flows,” Helfert said, adding that they’re not tied to more cyclical sectors such as retail and hotels, or face concerns about vacancies and the prospect of higher property taxes in New York City, as office owners.

Still, don’t be surprised to see REITs broadly continue to pick up steam. In addition to State Street’s ETF, Vanguard Real Estate, Schwab U.S. REIT, and iShares Core U.S. REIT are good ETF options for investors. And despite this year’s rally, these four ETFs still trade at a notable discount to the broad market. They are all valued between 16 and 18 times earnings estimates for this year, versus a price/earnings ratio of nearly 22 for the S&P 500.

REITs are on sale. It’s time for investors to play landlord and snatch up some property of their own.

Both the S&P 500 and the Nasdaq Composite are down roughly 5% for the year, which—as the chart below shows—is considered a normal pullback. Both indexes have essentially held their 200-day moving averages, and for the most part investors continue to buy the dips.

This may be a reasonable time to begin nibbling for a near-term move higher. Of course, if oil prices continue to rise, the market could easily morph into a standard correction.

One thing to always remember: the stock market forces participants to take calculated risks.

Typical Stock Market Pullbacks

• Minor pullback:
  • % Decline: 3–5%
  • Frequency: Very common
  • Meaning: Normal profit-taking

• Standard correction:
  • % Decline: 5–10%
  • Frequency: 1–2 times per year
  • Meaning: Healthy reset
    

– Richie

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