Monthly Market Insights March 2026

If February was the month the glass cracked, March was when those cracks formed a new mosaic. Volatility did not vanish; it intensified and migrated. The rotation we have been tracking accelerated further, but with a crucial twist: leadership divergence became more extreme, and the AI trade, which had already broadened into hard tech, encountered its first meaningful reality check through project level headlines rather than macro speculation. At the same time, Washington’s policy engine remained in motion. Tariffs graduated from headline risk to operating assumption, geopolitics escalated, and energy markets reacted accordingly. Yet even as headline indices declined sharply, the market’s underlying structure proved resilient in pockets. By month end, it was evident that investors are no longer simply rotating out of mega cap technology, they are repositioning for the next phase of the cycle, one where execution, supply chains, energy infrastructure, and domestic exposure matter as much as innovation itself.

March Market Performance and Rotation

March delivered one of the clearest divergences of the cycle so far. While most major indices declined meaningfully, dispersion beneath the surface remained intense, with domestically oriented and cyclically exposed areas holding firmer ground than some of the prior leadership cohort. Large cap growth absorbed a substantial portion of the drawdown, while parts of the market tied more closely to the real economy and balance sheet sensitivity proved comparatively steadier at various points through the month, even as month end levels ultimately reflected broad risk reduction. Unlike February, when improving breadth softened otherwise mixed performance, March’s dispersion sharpened. This was not a rising tide market; it was a selective and rotational one. On March 9th, crude oil traded in its widest intraday range since the pandemic years, swinging nearly $38 in a single session. That date has an odd history in market lore, coinciding with major inflection points in prior cycles, and once again served as a reminder of how sensitive risk pricing remains to energy and geopolitical developments. March 9th also marks the bottom we experienced in 2009 during the financial crisis and happens to be my husband’s birthday - the opposite of mine which is early November. The world seems to be off kilter on those two key dates, perhaps exacerbated by the shifts in Daylight Savings Time.

📉 S&P 500: 6,528.52 (-5.09% MoM)
📉 S&P 500 Equal Weight: 7,624.61 (-8.03% MoM)
📉 NASDAQ Composite: 21,590.63 (-4.75% MoM)
📉 Dow Jones Industrial Average: 46,341.51 (-5.38% MoM)
📉 Russell 2000: 2,496.37 (-5.17% MoM)

While March’s headline numbers were broadly negative, the composition of the drawdown matters. Equal weight underperformance points to selling pressure extending beyond a small cluster of mega caps, while the relatively tighter declines in certain areas of growth suggest the market was not uniformly repricing “risk” as one block. The rotation remains real, but March showed that rotation can occur through relative resilience and leadership reshuffling, even when index level returns are negative.

Key Themes

Trade and Tariffs, From Shock to System

March marked the evolution of trade policy from episodic risk to institutionalized reality. With February’s Supreme Court ruling still fresh, the administration leaned on alternative statutory authorities to impose a new round of targeted tariffs, focused on semiconductors, critical minerals, and finished electric vehicles. Markets absorbed the announcements with less drama than earlier iterations. Corporations have now embedded higher input costs into guidance, while supply chain reconfiguration has shifted from plan to execution. Domestic beneficiaries, steel, industrial metals, and U.S. based manufacturing, continued to outperform, while companies with Asia centric supply chains faced renewed margin compression. The weaker U.S. dollar, a theme we flagged earlier in the year, remained a meaningful offset for exporters.

Tax Cuts in Practice, A Divided Consumer

Tax refund data through March reinforced the two-speed consumer dynamic we outlined last month. Higher income households continued to channel refund activity into experiential spending, luxury travel, premium autos, and high-end hospitality all remained robust. Middle-income households saw a modest boost, but much of it was consumed by higher energy and food costs. Lower income cohorts increasingly relied on credit, with delinquencies trending higher. The consumer is not collapsing, but conditions are tightening at the margins. Incremental spending power is increasingly concentrated among those allocating toward experiences and capital adjacent services, a continued tailwind for leisure, hospitality, and selectively positioned retailers.

Federal Reserve Transition, A Higher Strike Price

Kevin Warsh was officially confirmed as Federal Reserve Chair in mid-March, delivering his first full policy statement at the March 18 FOMC meeting. Rates were held steady, with officials acknowledging that the cumulative effects of recent trade policy changes warrant close observation. Markets interpreted the tone as pragmatic but less protective. Inflation tolerance appears modestly higher, but the implied Fed put now sits well below prior cycles. Volatility reflected that recalibration, with the VIX pushing into the 30s by month end. The market has absorbed a significant amount of stress without capitulation, an impressive display of durability, though not without limits.

AI Digestion and the SpaceX IPO Halo

The AI trade entered its most significant digestion phase since early 2025. High profile data center delays and revised expansion plans highlighted a reality long understood but rarely priced: AI demand is secular, but infrastructure build outs are nonlinear. Power availability, permitting, and capital intensity matter, and timelines can stretch. Offsetting some of that caution, anticipation surrounding a potential SpaceX IPO reignited enthusiasm across aerospace, defense, and industrial technology. Companies tied to satellite communications, launch services, advanced manufacturing, and mission critical hardware saw renewed interest. The distinction between software-leading AI enthusiasm and infrastructure driven hard tech is becoming increasingly clear, and increasingly relevant.

SBOT (Steven Bot) Update

TSG’s proprietary AI strategy, SBOT, launched in 2024, continues to outperform its benchmark, the S&P 500, year to date, rolling one year, and since inception. While broad indices struggled through the first quarter, SBOT delivered positive performance. As the AI cycle matures, leadership is shifting from concept to commercialization. Artificial intelligence is reshaping every sector of the economy, but durable winners will be those who can deploy capital efficiently, integrate AI into operations, and convert innovation into sustainable cash flows. SBOT is structured to capture those toll collectors, not the headlines.

Geopolitics, Iran, and Sudden Risk Re Pricing

Geopolitical tensions centered around Iran remained a dominant market driver through much of March, with escalating rhetoric and disruptions to shipping routes amplifying risk premiums across asset classes. Concerns surrounding sustained supply interruptions through the Strait of Hormuz pushed crude prices higher for much of the month, acting as a tax on consumers and compressing margins across energy intensive industries.

The final trading day of March, however, delivered a sharp inflection point. Equity markets staged a powerful relief rally after credible signals emerged pointing toward de-escalation and renewed diplomatic engagement. Reports carried by Iran’s official media suggesting a willingness to negotiate, while U.S. leadership signaled openness to off ramps from direct conflict. The combination triggered a rapid unwind of risk-off positioning. Oil prices retreated meaningfully, volatility compressed, and equities responded with one of the strongest single day advances of the year, led by technology, cyclicals, and other previously oversold segments. The speed and magnitude of the rebound reinforced an important market reality. Recent price action has been driven less by changes in fundamental earnings expectations and more by shifts in geopolitical probability distributions. As the perceived tail risk of prolonged conflict declined, capital rotated aggressively back into growth and risk assets, while traditional defensives and energy exposures surrendered a portion of their recent gains.

From a portfolio construction standpoint, March highlighted the importance of balance. Exposure to real assets and energy continues to serve as insurance against uncertainty, while maintaining flexibility remains critical when risk premiums compress suddenly. In an environment defined by rapid narrative shifts, diversification is no longer static, it must be adaptive.

Passive Risk and Active Opportunity

March offered a textbook illustration of passive rebalancing risk. Ongoing inflows into cap weighted index vehicles mechanically forced selling across many of the largest technology names, exacerbating drawdowns even where fundamentals remained intact. At the same time, active positioning in areas like energy, industrials, and defense was rewarded. The sharp divergence within the market underscores a critical point: opportunity has broadened, but it requires selectivity. This is no longer an index driven regime, fundamentals and positioning matter again.

Conclusion and Outlook

Much of the economy slipped into a rolling recession years ago, even as index performance masked underlying stress. That condition has not resolved, it has rotated. Inflation pressures, higher energy prices, and financial tightening continue to weigh unevenly across consumers and industries. Yet March also demonstrated a core strength of U.S. markets: adaptation. Corporate America continues to adjust, fiscal policy remains supportive in practice, and capital is migrating, not retreating. Seasonally, April has historically been one of the strongest months for equities, finishing higher roughly 76% of the time since 1985. Our focus now shifts toward first quarter earnings, with particular attention on industrial margins, energy cash flows, and continued developments in aerospace and infrastructure driven technology. The rotation is no longer a narrative. It is the market’s structure.

Regardless of the path forward, we remain disciplined, selective, and prepared, navigating with the same curiosity and rigor that brought us here.

Onward & Upward Always!

Steven

STEVEN W. SCHMITT, MBA, CFP®, CPM®, CRPS®, ADPA®

Managing Director

Private Wealth Advisor

Certified Financial Planner Board of Standards, Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, and CFP® in the United States, which it authorizes use of by individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

Any opinions are those of Steven Schmitt and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice.

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The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market.

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