Monthly Market Review
March 2026
U.S Overview
March proved to be a sharply negative month for U.S. equity markets, as the escalation of the U.S.-Israel military conflict with Iran has posed a significant challenge to an economy that had largely been resilient in the face of volatile U.S. economic policy. Fears of high energy costs drove broad U.S. equity benchmarks lower, with major indexes declining between 4.5% and 6% and the S&P 500 posting its worst monthly performance in a year. The Nasdaq also fell sharply, as the selloff extended across both growth and value stocks. Unlike prior months, where investors began to reallocate capital away from the tech sector over fears of an AI bubble, March’s drawdown was driven by a broad market selloff rather than sector rotation, with energy the sole sector to post positive returns amid surging oil prices.
Like all broad-based diversified portfolios, our portfolios reflect the breadth of the selloff. Though our portfolios remained close to their benchmarks, the declines are reflective of the economic consequences of the current administration’s foreign policy.
The Federal Reserve held interest rates steady at its March meeting, maintaining the federal funds rate. However, officials raised their inflation projection for 2026 to 2.7% and noted that economic uncertainty, particularly surrounding the conflict in Iran, remains elevated. If such inflation projections come to fruition, we can expect the current cost-of-living challenges to be exacerbated for middle and working-class families.
International Overview
In contrast to February’s strong international outperformance, the March selloff was global in nature. Europe’s STOXX 600 closed the month with its steepest monthly loss since mid-2022, as the continent’s heavy reliance on oil and natural gas imports through the effectively shuttered Strait of Hormuz weighed on economic sentiment. The European Central Bank held rates steady at its March meeting but acknowledged that the war has made the outlook significantly more uncertain, creating upside risks for inflation and downside risks for growth. The ECB raised its headline inflation forecast for 2026 to 2.6%, up from its previous projection of just below 2%, and cut its growth forecast to 0.9%. Eurozone inflation jumped to 2.5% in March, well above the ECB’s 2% target, driven by surging global energy prices.
In Asia, Japan’s Nikkei 225 was the worst-performing major global index in March, shedding approximately 13% for the month after reaching record highs in late February. Japan’s deep reliance on Middle Eastern energy imports — approximately 87% of its total supply — made its equity market especially vulnerable to the oil shock. South Korea’s Kospi index also saw steep losses, falling roughly 6% in a single session as concerns over energy costs and semiconductor supply chains rattled investors. Chinese markets experienced comparatively moderate losses, though regional sentiment was broadly negative.
Emerging markets declined alongside their developed counterparts. Rising energy costs, a stronger U.S. dollar in certain periods, and elevated geopolitical uncertainty offset the favorable positioning that many emerging economies had carried into the month.
What does this mean for you?
March’s results underscore that in periods of global stress, short-term underperformance is neither unique to our portfolios nor indicative of any erosion of our long-term investment objectives. Our strategy continues to be anchored in delivering steady long term returns. Our Diversified portfolios, while not immune to the global downturn, held up comparatively well relative to their respective benchmarks. Our Fossil Free portfolios tracked their benchmarks closely during the selloff, consistent with the index-oriented construction of their mandate. Based on the first three months of 2026, returns for our Stable Value Portfolio should remain constructive, reflecting the continued benefit of competitive CD rates. The primary objective of the Stable Value Portfolio is to allow short-term or rainy-day funds to keep up with inflation while maintaining liquidity.
The fixed income component of our portfolios faced significant headwinds as Treasury yields rose sharply (a rapid decline in Treasury prices) during the month, although the stabilizing role of bonds in periods of equity volatility remains an important feature of the portfolio construction. While the month tested investor resolve, diversification remains an important tool for managing such uncertainty.
What we are monitoring
U.S.-Iran Military Conflict: The conflict, now in its fifth week, has effectively shut down commercial traffic through the Strait of Hormuz. Brent crude oil surged approximately 42% in March, closing the month near $104 per barrel after peaking near $120 mid-month. The scope and duration of the conflict remain highly uncertain, though unreliable signals of potential de-escalation — including reports of diplomatic openings — provided some relief. The oil shock has significant pass-through implications for consumer prices, corporate margins, and the Federal Reserve’s rate path. We are closely watching whether energy-driven inflation proves transitory or triggers more persistent economic damage.
Thank you for your continued trust and support. It is our privilege to serve as stewards of your financial assets.
Sincerely,
The Faith Foundation Team
