It’s March 2026, and the stock market, much like a seasoned sailor, is still finding its footing amidst shifting winds. We've seen a remarkable resilience, a testament to strong earnings and a consumer who, despite everything, keeps spending. Lower interest rates are certainly a tailwind, but the real story is how the market has learned to absorb, and even thrive on, policy uncertainty.
I recall the jitters of April 2025. President Trump's tariff announcements and the subsequent trade rule shifts sent the S&P 500 tumbling nearly 20% in just seven weeks. It felt like a significant blow. But then, something interesting happened. The market didn't just recover; it surged, climbing almost 40% from its low and hovering near all-time highs. This wasn't about uncertainty vanishing, but about investors realizing that businesses could adapt, profits could still grow, and the economy was more robust than many feared. Bill Merz from U.S. Bank Asset Management Group put it well: investors overcame their concerns about tariffs impacting growth, earnings, and inflation.
What’s truly encouraging is that this recovery wasn't just a few big names carrying the load. Smaller companies joined the rally, with their stocks jumping nearly 50% from those April 2025 lows. When more segments of the market participate, it signals a more durable upward trend, even if daily fluctuations remain part of the landscape.
However, the waters aren't entirely calm. Geopolitical tensions, particularly the strikes against Iran and the ongoing conflict in Ukraine, have injected a fresh dose of volatility. Energy costs have predictably spiked, with oil prices jumping over 25%. This sent global markets pulling back, with the S&P 500 dipping about 3.5% and international indexes seeing steeper declines of 8-10%. It’s a stark reminder that international markets, often more reliant on energy imports, feel these shocks more acutely.
Tom Hainlin, a senior investment strategist at U.S. Bank Asset Management Group, frames the core question perfectly: "The key market question is not whether conflict creates headlines. It is whether higher energy prices last long enough to slow growth, lift inflation, and change the path for interest rates." The Strait of Hormuz, a critical artery for global oil and LNG trade, remains a focal point. Any prolonged disruption there could have significant ripple effects, not just on energy but also on vital trade routes for things like fertilizers.
We're looking at a few potential scenarios. The best-case scenario sees shipping lanes quickly normalizing and energy prices easing. A more prolonged disruption could keep costs elevated for weeks, while a worst-case scenario, stretching into the summer, might start to noticeably impact consumer spending, corporate profits, and overall economic growth.
Trade policy, while still a factor, has shifted from being the sole driver of market reactions to one piece of a larger puzzle. A Supreme Court ruling and subsequent tariff adjustments have altered the landscape, but the effective tariff rate remains higher than in 2024. The conversation has moved from if tariffs will cause volatility to how much they will truly alter growth, inflation, and profit trends. It’s a more nuanced, and perhaps more realistic, approach to navigating these complex economic currents.