March Madness

Global equity markets declined in March, a selloff provoked by higher oil prices following the onset of Operation Epic Fury in Iran. Foreign stock benchmarks fell by 8-10% for the month, while major U.S. indexes fell by roughly 6%. Bond prices declined slightly too, reflecting higher inflation risk.

The S&P 500 Index was recently near the 10% decline threshold – usually described as a “correction” – so we offer some historical perspective. This would be the 25th decline of 10% or more since 1990. This suggests a significant stock market setback occurs, on average, every 17 months. Recent corrections include the selloff a year ago that climaxed after the “Liberation Day” tariff announcement, and the market dive that occurred in early 2023 following the collapse of Silicon Valley Bank. Stock market volatility is normal, not exceptional.

Energy, AI, and Interest Rates

Drivers are feeling pain at the pump, a daily reminder of the cost of disruption in the Strait of Hormuz. Approximately 20% of global oil consumption and liquefied natural gas trade depends on this vital waterway. A sustained period of higher energy prices would be a headwind for the U.S. economy, and an even greater challenge for Europe and Asia. The risk of a 2026 recession, which seemed remote just a few months ago, is certainly higher today for America, and much higher for Europe and Asia.

AI companies have been stock market darlings for the last three years, but enthusiasm has been tempered so far in 2026. Massive capital spending plans (i.e., data centers) now provoke apprehension rather than unbridled enthusiasm, as the payoff timetable for investors seems uncertain. For society at large, AI’s transformative impact has aroused concerns about job loss and higher utility bills, and this is leading to greater political and regulatory risk for technology companies.

In the realm of monetary policy, the Federal Reserve will soon have new leadership. While lower interest rates are a political priority, the reality of current inflation (closer to 3% than 2%) and pressure from recently higher commodity prices will make this difficult.

Navigating Volatility

Financial market history repeatedly shows emotion tempting investors to abandon disciplined strategies in favor of dramatic, “all-in” or “all-out” maneuvers. There is always worry and controversy. Today there is polarized debate about war, volatile speculation regarding oil prices, concern over AI’s impact, and fraught anticipation of Federal Reserve policy changes. The media often frames such events in binary terms. This promotes a “risk-on” or “risk-off” mentality, creating a reactive environment in which markets can swing wildly between optimism and fear.

A more reliable approach is dispassionate and objective, rejecting investing extremes in favor of a more consistent, “risk-aware” framework. This recognizes that while market sentiment often swings between hot and cold, business fundamentals – corporate profits and dividend payments – are generally steadier and usually warm. While the U.S. has experienced four recessions since 1990, these totaled 36 months, which means the economy was growing 90% of the time. Corporate profits for S&P 500 companies increased in 27 of 36 years since 1990, and dividend payments rose in 30 of 36 years. Despite 25 market declines of 10% or more since 1990, only two evolved into major selloffs (2000-2002 and 2008), and stocks delivered roughly 10% annualized returns for patient shareholders. The statistical odds certainly favor the optimist. Nevertheless, a disciplined manager knows a solid financial plan and good safeguards, such as bonds and cash, are vital for those with less risk tolerance, including retirees and other investors relying on portfolio distributions.

Effective investing is therefore much like safe driving. A smart motorist doesn’t stay off the road for fear of a collision, nor do they drive so slowly that destinations are missed. They plan carefully so that driving at a reasonable and steady speed can meet objectives. A shrewd investor similarly operates with calculated confidence, ensuring their “seat belts” – asset allocation, diversification, and periodic rebalancing – are securely fastened, with financial plans that do not require unnecessary risk.

Rest of the Year

Bartlett has no advantaged insight into the direction of oil prices, interest rates, and related macroeconomic factors. We certainly have no unique intuition as to geopolitical risks and diplomatic endeavors. Instead, we are laser-focused on things we can control. These are summarized below.

• Maintaining appropriate asset allocation, with occasional rebalancing based on investment policy guidelines rather than emotions.
• Preserving thoughtful equity diversification, so that occasional disruptions in economic sectors do not inflict lasting damage on a portfolio.
• Carefully tending to credit quality and interest rate risk, so that our bond selections provide reliable portfolio ballast during stock market selloffs.
• Proactively maintaining cash reserves so that portfolio distributions do not require selling stocks and bonds during periods of distress.
• Minimizing – or at least moderating – tax costs.

Effective financial management is disciplined rather than dramatic. It is grounded in realism rather than undue optimism or pessimism. It is neither exultant in good times nor despondent in bad times. As your advisors, we are running a marathon, not a sprint.

Concluding Comments

We are very grateful for your loyalty and trust, especially during periods of market distress. Bartlett has continued to add new clients this year, and we would like to help more people. Please recommend us to family, friends, and associates who could benefit from our fiduciary approach to financial planning and investment management.

DISCLOSURE:
This material provided by Bartlett Wealth Management (“Bartlett”) is for informational purposes only and is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation of any particular security, strategy or investment product. Nothing in these materials is intended to serve as personalized tax and/or investment advice since the availability and effectiveness of any strategy is dependent upon your individual facts and circumstances. Opinions expressed by Bartlett are based on economic or market conditions at the time this material was written; actual economic or market events may turn out differently than anticipated. Facts presented have been obtained from sources believed to be reliable. Bartlett, however, cannot guarantee the accuracy or completeness of such information, and certain information presented here may have been condensed or summarized from its original source.