Are We Getting Closer?

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

• DJIA 52-wk: +8.62% | YTD: -6.03% | Wkly: -0.90%
• S&P 500 52-wk: +14.12% | YTD: -6.96% | Wkly: -2.12%
• NASDAQ 52-wk: +20.93% | YTD: -9.87% | Wkly: -3.23%
• State St. Energy Select SPDR ETF 52-WK: +35.35% | YTD: +39.92% | Wkly: +5.48%
• Russell 2000 (RUT): +0.5% For The Week | Friday Close: 2,449.70

Takeaway: another risk-off week, with tech/AI taking the brunt, while small caps showed relative strength early before fading into Friday.

1) Oil and the Middle East stayed in control

This was still the macro driver of the tape.

1. Escalating conflict involving Iran
2. Fear around the Strait of Hormuz
3. Crude surged again by Friday:
   1. WTI ~ $99.64
   2. Brent ~ $112.57 Reuters

Why it mattered:

Higher oil = higher inflation fears = fewer Fed cuts = lower stock multiples

That chain reaction controlled the week.

2) Fed cut hopes kept fading

The market is no longer trading a clean “rate-cut” script.

By the end of the week:

1. traders had dramatically reduced odds of cuts
2. some pricing even leaned toward renewed hike risk Reuters

Translation:

This is especially bad for:

1. AI / semis
2. high multiple tech
3. long-duration growth names

And that’s exactly where the pain showed up.

3)AI / semis got hit hardest

This was a de-risking week, not just a random selloff.

This was a de-risking week, not just a random selloff.

What happened:

• Megacap tech and AI leadership sold off hard Friday
• Nasdaq was the weakest major index on the week
• Semis and growth names were used as sources of liquidity Reuters

Institutional read:

Funds are trimming the winners first.

That does not automatically mean the AI trade is dead — but it does mean the market is forcing positioning cleanup.

Hits a three-month low.

Market Volatility Doesn’t Always Signal Economic Weakness:

Market volatility has been on the rise. The conflict involving Iran has injected fresh uncertainty into the outlook, particularly through its potential impact on energy markets. And just as quickly as oil spiked and stocks wobbled on fears of escalation, markets reversed course early this week after reports of possible diplomatic progress—sending Brent crude sharply lower and stocks higher.1

This kind of day-by-day price action is a useful reminder that headlines can move markets in the short run. But investors should be careful not to confuse short-term volatility with a lasting change in the underlying economic picture. The more important question is whether higher energy prices are beginning to damage growth. So far, the incoming data do not suggest that they are.

Across major geopolitical events since 1950, markets have often experienced short-term volatility, but they have generally stabilized and moved higher in the months that followed as uncertainty faded and the economic damage proved more limited than feared. That does not make conflict bullish. It simply underscores that markets tend to respond more to the gap between expectations and reality than to the headlines themselves.

Bottom Line for Investors

Geopolitical events can create sharp market swings, especially when oil prices are involved. But volatility alone is not evidence of economic weakness. The latest data continues to show consumer demand, business investment, and earnings growth holding up reasonably well, even as energy markets react to the latest headlines.

If oil prices were to spike sharply from here and remain elevated for a sustained period, the risk would increase. But that is not the same as saying the economy is already rolling over. For now, the better reading is that markets are reacting to uncertainty while the underlying economic picture remains more resilient than the headlines suggest.

If that’s the case, the real advantage comes from staying focused on what the data is actually showing, not just how markets are reacting in the moment.

When the going gets tough, the tough starts readying their dry powder for deployment.

And yes, it’s tough out there. While the Dow Jones Industrial Average

DJIA -1.73% declined just 0.9% this week, it is officially in correction territory, as is the Nasdaq Composite COMP -2.15%, which slumped 3.2%. The S&P 500 index SPX -1.67% fell 2.1%. Not even an extension of President Donald Trump’s deadline to attack Iran’s power grid could help the market find support.

The market’s concerns about the Iran war are reflected in the Cboe Volatility IndexVIX +13.16%, or VIX, which closed at its highest level in almost a year, 2025. Still, at 31, it’s not close enough to 40 to signal a washout, according to Rosenberg Research founder David Rosenberg. “One of the most interesting aspects of this market is the complete lack of capitulation,” he writes.

But that moment may be getting close. For one, Trump clearly wants to leave an opening for a deal. On Thursday, he said he was extending Iran’s deadline to open the Strait of Hormuz to April 6, from the March 27 deadline he had offered Monday. He has also said on multiple occasions that he prefers that the war end in a matter of weeks. “The Trump Put has been struck,” writes Chris Harvey, head of equity and portfolio strategy at CIBC Capital Markets. “Let’s just say there is plenty of light.”

Valuations suggest an end may be near. The S&P 500 trades at just under 20 times 12 month forward earnings, down 12% from just over 22 at the end of 2025. Mike Wilson, Morgan Stanley’s chief U.S. equity strategist, notes that the decline is “as significant” as the ones that occurred in 2015 and 2023. At the same time, expected earnings growth for the next 12 months has accelerated to 17%. When the two trends have occurred simultaneously in the past, the S&P 500 has gone on to gain a median 10% over the following six months, above the long-term average of 5%, Wilson’s data show.

“We remain convicted that this is a correction in a bull market that started last April from the depths of a rolling recession,” he writes. “Our work suggests the correction is well advanced not only in time but price.”

The economy will determine if he is right. Higher inflation caused by rising oil prices is likely to keep the Federal Reserve’s hands tied for now, which means that the markets can no longer count on a boost from lower rates.

Still, the Chicago Fed National Financial Conditions Index remains looser than its historical average, notes Seaport Research Partners Chief Equity Strategist Jonathan Golub, a sign that money is still freely available and can help keep the economy grow. What’s more, economists have reduced their growth forecasts for 2026 U.S. gross domestic product by only a tenth of a percentage point, to 2.4%, since the Iran conflict.

That’s not to say that the market won’t fall further. At just under 6400, the S&P 500 has dropped 8.5% from its record high and could be well on its way toward a correction. With support at 6500 broken, 6150 becomes the next level in play, writes Adam Turnquist, LPL Financial’s chief technical strategist. After that, 6000 would be the target. That would mean the stock market could drop another 6.1% before finally finding a bottom.

But make no mistake—a bottom is likely closer than investors think.

Meta Set a $9 Trillion Target. Then Came a Wave of Bad News.

This past week, Meta PlatformsMETA-3.99%filed paperwork outlining incentive plans for senior executives not named Mark Zuckerberg. This wouldn’t be news except for the fact that the strike prices for the included stock options range from $1,116 a share to $3,727. Ultimately, for the options to all be in the money, Meta would need a market value of at least $9.6 trillion.

Put another way: Meta shares would have to rise 580%, or an annualized 47%, over the five-year terms of the options.

“This is a big bet,” a Meta spokesperson tells Barron’s. “These pay packages will not be realized unless Meta achieves massive future success, benefiting all of our shareholders. As with all stock options, there is only value if the share price meaningfully exceeds the exercise price, and in this case, it must be on an exceedingly aggressive five-year timeline.”

And it is “exceedingly aggressive.” Meta, one of the largest companies in the world, would have to return to the earnings growth rates it last saw in the 2010s as a relatively young company in the emerging digital ad space.

To be sure, Meta has some room to grow its price/earnings multiple. Until early 2022, the company’s forward P/E ratio was above that of the broad S&P 500 index. Since then it has roughly tracked the index’s valuation. By Friday, the P/E had dipped to 17, well below the S&P 500’s 20.

The $9 trillion market value could be a little more feasible if investors return to paying a richer multiple for the company’s earnings. If the stock’s P/E rose to 30, EPS would have to increase by 33% a year, still a tall task. Even at 40 times, Meta would have to grow earnings 26% earnings annually for five years.

Meta wouldn’t get specific when I asked how a $3,700 share price within five years might be possible. But, likely, the dream is that Meta leverages its 3.6 billion users worldwide and becomes the leading provider of consumer artificial-intelligence services, maybe through its AI smart glasses.

To pull this off with just digital advertising, Wells Fargo analyst Ken Gawrelski says, Meta would have to go from roughly a 30% market share to more than 55%. “To get to these strike prices means that Meta must create new revenue streams, and it can’t be strictly digital advertising,” he says.

To that end, Meta is opening up the spigot. It spent $111 billion on capital expenditures for AI data centers in the past two years, and Gawrelski estimates that the total for the next three years will be half a trillion dollars. The company also has mounting debt and lease liabilities related to its AI ambitions. While Amazon.comAMZN-3.95% , MicrosoftMSFT-2.51% , and AlphabetGOOGL-2.34%spend even more, their cloud units rent out most of the AI servers they buy, and those revenue streams are growing rapidly.

Meta’s data centers, on the other hand, are all for itself: for its own research, for raising engagement and the effectiveness of ad-targeting, and ultimately for serving up new AI experiences to users. Meta has also been on a hiring-and-firing binge, bringing in expensive new AI researchers and executives, while reorganizing other units and laying off existing staff.

This is a far more expensive and disruptive shift than the company’s failed pivot to the metaverse.

The mounting depreciation from all of its capex will become a bigger drag on Meta’s earnings in the coming years. If Meta hits its 2026 capex target, it will have little operational cash flow remaining for share buybacks; curtailing that cash-return program could depress the stock price.

A bigger long-term risk came into focus this past week after two court decisions went against Meta. In New Mexico, a jury settled on a $375 million penalty after the state sued the company under a consumer protection law claiming that Meta misled children and parents when it marketed Facebook and Instagram as safe environments for minors. A second phase of the trial is coming in which the state’s attorney general will be asking a judge to grant further relief, including forcing Meta to verify the age of users in the state.

Meanwhile, in a California state court, a woman won a trial in which she claimed Meta’s apps were designed to be addictive, harming her mental health as a child and exposing her to exploitation by adults. The award was $6 million total, with Meta splitting the bill with Alphabet, also a defendant in the case.

“We respectfully disagree with the verdict and will appeal,” Meta said in an emailed statement. “Teen mental health is profoundly complex and cannot be linked to a single app. We will continue to defend ourselves vigorously as every case is different, and we remain confident in our record of protecting teens online.”

Meta stock fell 8% on Thursday following the back-to-back court losses and was down more on Friday.

These lawsuits are the tip of the iceberg. There are thousands of individual suits like the California case, many of which have been consolidated in federal court for pretrial discovery. Cutting across political boundaries, hundreds of school districts are suing social-media companies with Meta as the primary defendant, as well as a majority of states.

One potential outcome is that every social-media company could be forced to verify the ages of their users, cutting off certain interactions. That’s an effort tech companies have sought to avoid because it has the potential to slow growth.

It would certainly make $9 trillion a bigger mountain to climb.

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