đMarch 2026 Market Strategy
The next four weeks will suck!
In my February 2026 Market Strategy, I highlighted the strong prevailing risk appetite that made investors eager to buy the dip rather than being concerned about larger downside potential. To the extent that investors were worried, they were mostly concerned about inflation and rising bond yields. I was more concerned about fiscal liquidity potentially dragging down the economy and the stock market. I was also concerned that the âAI will disrupt white collar jobsâ narrative would gain traction. Letâs see how the picture has evolved since then.
TLDR Summary
A lot depends on the events in the Strait of Hormuz right which is impossible to opine on without military intelligence. But even without the Iran war, macro isnât looking too good. The US economy is slowing significantly. 4Q25 GDP growth is now estimated at just 0.7%, drastically lower than previous expectations. The labor market is showing decisive weakness.
Treasury yields, inflation data and inflation expectations are not yet moving lower as a response which may give rise to the stagflation narrative again soon. I believe we will ultimately have to see a spike in recession fears before a buyable bottom can occur.
Institutional investors have raised some cash over the last month. However, they are still knee-deep in the Debasement Trade which doesnât bode well given the macro context. The most vulnerable sectors will likely be commodities and banks. By longing EM/Europe vs. US, institutional investors are also caught wrongfooted from a geographic perspective. It seems likely that elevated energy prices will persist for a while. The US will then be a relative winner.
Fiscal liquidity keeps falling cyclically. But seasonality matters much more right now. We will likely have the largest tax related liquidity drain in history coming up in about four weeks. The stock market will be moody at least until then. Buckle up.
