From the desks of Stanley Katz & Lauren Madera
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The major US indices extended their losing streak to a fourth consecutive weekly decline (DJIA: –2.11%, S&P 500: -1.89%, Nasdaq: -2.07%), placing year-to-date performance firmly in negative territory (DJIA: -5.17%, S&P 500: -4.95%, Nasdaq: -6.86%). The DJIA marked its longest weekly losing streak since February 2023, and the Russell 2000 small-cap index slipped into correction territory (i.e., down 10% from its January high). Intraday Friday, the Nasdaq and DJIA also touched correction territory before backing off at market close. We can blame market results on the headline-heavy week. Oil prices surged following Israeli and Iranian attacks on major energy infrastructure in the region, with Brent crude climbing roughly 10% to $112.61 per barrel. The Federal Reserve’s FOMC meeting Tuesday and Wednesday brought little comfort. Policymakers held rates steady at 3.50%-3.75%, maintained a hawkish tone despite geopolitical uncertainty, and revised inflation expectations modestly higher over energy cost concerns. Treasury yields consequently rose to seven-month highs as bond markets priced in the potential durability of these pressures.
Capital Group’s latest volatility guide offers critical perspective for investors navigating this choppiness. History shows that while market declines sting, the average 12-month return following a 15% or greater decline in the S&P 500 is 52%—a powerful reminder that short-term pain often leads to medium-term recovery. Bear markets have lasted an average of just 12 months since 1949, compared to 67 months for bull markets. Applicable to current conditions, the firm notes that oil shocks tied to geopolitical crises have typically been short-lived; markets recovered within two weeks in seven major oil-related disruptions dating back to 1990. Against this backdrop, Capital Group notes that bonds may deserve renewed attention. While Treasury yields have climbed on inflation fears, higher yields may offer greater cushion to absorb price volatility. Most importantly, staying the course—rather than chasing the latest headline—has historically paid off far better than reactive trading.
Argus Research’s sector analysis reveals where investor capital is huddling amid uncertainty. The Energy sector leads decisively with a 28.2% year-to-date gain with every subsector in double digits—exploration & production up 18%, refining & marketing up 38%. Materials, the second-best performer, is up 12.6% year-to-date, though returns are highly dispersed. Commodity chemicals are up over 60%, while construction materials are down 14%. These “wealth in the ground” hedges reflect investor concern about sustained inflation. The energy price shock has not yet been reflected in official inflation data. Gasoline prices have jumped 24% since the start of the Iran war according to AAA, anticipating the cost pressures that typically lag crude by 4-6 weeks. Meanwhile, the remainder of the market is struggling. Financials are down in the low double digits, and Consumer Discretionary is down 7%. Technology is down 6% with application software down 23% attributable to AI displacement fears. Argus warns that cooler heads may eventually prevail in the Iran conflict, but oil prices are unlikely to return to pre-war levels until negotiations begin—a potential multi-month headwind for cyclical sectors like airlines, automotive, and housing.
Below are links to a number of third-party research reports that we have read and analyzed over the past week. We hope you will find the information interesting, useful, and worthwhile.
Capital Group:
Argus:
Columbia Threadneedle:
BlackRock:
J.P. Morgan Asset Management:
Stanley Katz & Lauren Madera, Financial Advisors
ClientFirst Financial Strategies, Inc.
937-293-5500
Source for weekly stock market returns: Barron’s.
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