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Market Commentary

Monthly Financial Markets Commentary — March 1, 2026

Stocks and bonds were mixed for the month of February, with many cross currents. Selling swept through the Nasdaq with concern about the effects of AI coding capability on software companies, specifically, the challenge to SAS companies such as Workday and Salesforce. This concern was starting to ebb and be questioned by the end of the month however. Other big news was the invasion of Iran, which threatens to drive up the price of oil, with negative effects on global growth and inflation. Finally, financial stress in private credit and private equity has affected optimism about technology and raised concerns about credit spreads.

By all measures, such as price-earnings, price-to-sales, market-cap-to-GDP, Schiller CAPE Ratio, stocks still remain grossly overvalued. Retail investors have bought every dip in the market since 2010. Speculation in the market remains significant, with margin balances and stock ownership percentages being in record territory. In short, investors are all in. Retail investors are now supposedly the smart money, as institutions have been much less enthusiastic about equities. Historically this has not been a good setup for further advances in the market.

For 2026 the S&P 500 Index, the capitalization-weighted broadest measure of U.S. stock market performance, has returned -0.76%. The Nasdaq Composite Index, another capitalization-weighted index, but more reflective of growth stocks, has returned -3.36%. Finally, the Dow Jones Industrial Average, a price-weighted index, has returned 0.33%. All returns are on a total return basis that includes dividends.

The Morningstar U.S. Aggregate Bond Index, a broad measure of the U.S. bond market, has returned 1.75% for the year. The Fed cut the Fed Funds Rate by .25% three times during 2025; nevertheless the long-end of the curve did not fall much, indicating the Fed has little control over long-term rates. Credit spreads remain at very low levels, meaning that investors are demanding very little premium over so-called risk-free 10-year treasuries.

The sectors in the equity market that have performed the best so far in 2026 are Consumer Staples, Energy, and Materials at 15.8%, 24.8% and 17.2%, respectively. Financials, Consumer Discretionary, and Information Technology have fared the worst at -5.9%, -3.1% and -5.1%, respectively.

The comparison of current price/earnings ratios and dividend yields as of March 1, 2026 to those of the prior year is as follows.

* based on 12-month trailing data

The dividend yield, which is at historic lows, is a reliable metric of valuation, since it cannot be manipulated as earnings frequently are. Dividend yields continue to fall in 2026.

Gold and crude oil most recently traded at $4,125.75 and $67.85, respectively, compared to $2,985.50 and $70.25 one year earlier. Gold has risen in reaction to global political instability, increased holdings by all central banks and general concerns about the value of the dollar and creditworthiness of the United States (as well as other G-7 economies, and China). Gold has significantly outperformed the S&P 500 index in 2026 (as it has since January of 2000). The price of oil has risen in reaction to the potential Iran invasion, general political instability and a falling dollar.