F.N.B. Wealth Management Fast Five

1. What happened in markets during March?

Global financial markets experienced a repricing of risks in March as the U.S. and Israel engaged in a war with Iran. Despite the elevated levels of volatility throughout the month and the unknown impacts of the war’s corresponding energy shock, market reactions appeared to be rational and deliberate. This is in addition to the fact that, prior to the start of the war, markets were already wrestling with a trifecta of concerns from renewed trade uncertainty, continued questions around AI spending and private credit worries. Given the high degree of uncertainties, it should not be a surprise that the S&P 500 was -5.0% for the month, the Dow Jones Industrial Average was -5.2%, the tech heavy Nasdaq was -4.7% and the Russell U.S. Small Cap Index was -5.0%. This meant the S&P 500 ended the first quarter -4.4%, but the Russell Mid Cap Index, Russell Small Cap Index and the Russell 1000 Value Index finished the quarter +1.3%, +0.9% and +2.1%, respectively, on the resiliency of the U.S. economy. International equity markets faired worse during the month of March, with the MSCI EAFE Index (developed markets) -10.2% and the MSCI Emerging Markets Index -13.0%. This is largely due to the amount of net energy importing economies in those indexes.

The U.S. Treasury market sold off as global bond markets started to reassess higher inflation, slower growth and greater government deficits. The yields of U.S. Treasuries reached the highest levels in 15 months, as the two-year yield jumped 40 basis points (bps) to 3.8% and the 10-year U.S. Treasury yield was also higher by 40 bps to 4.3%. The U.S. was not alone, however, as developed economies around the world saw selling in their government debt markets, which drove rates in countries like England and Australia to levels not seen since 2008 and 2011, respectively.

The commodity markets were all about the move in oil prices, as the price of Brent Crude (the global oil standard) spiked more than 65% year-to-date to $103.97/barrel and West Texas Intermediate (U.S. oil standard - WTI) jumped more than 72% to $101.38/barrel. The national average price per gallon for U.S. gasoline hit $4/gallon for the first time since 2022. The global energy shock is likely to have an impact on other commodities like agricultural products as input costs like fertilizer climb. Interestingly, gold — traditionally a safe haven during times of stress — was -11.6% during March.

The U.S. dollar showed it remains the world’s reserve currency and a haven asset, as the DXY Index finished the month +2.33% to 99.96 but was as high as 100.643 during the month. A stronger dollar can also be a headwind for international markets.

2. Did the Federal Reserve make any changes at their March meeting?

The Federal Open Market Committee (FOMC) chose to hold the Fed Funds Target Range at 3.50% to 3.75% and struck a somewhat dovish tone in their Summary of Economic Projections (SEP). Choosing to look through the global energy shock, their median dot plot for inflation did tick higher but was still projected to be on a downward trend for 2026 and 2027 (2.7% in ’26 and 2.3% in ’27). They also increased their expectations for U.S. GDP in 2026 and 2027 while maintaining their expectations for one rate cut this year. Of course, Fed Chair Powell was quick to discount those assumptions, saying, “if we don’t see progress [referring to inflation], then we won’t see the rate cut.” The Chairman was more hawkish in his press conference and emphasized concerns about inflation stemming from tariff shocks that seem less of a one-time price increase than originally thought and the unknown outcomes of the war in Iran. Powell went so far as to say, “It is too soon to know the scope and duration of the potential effects on the economy. The thing I want to emphasize is that nobody knows.” This is basically acknowledging the scope of potential economic outcomes has widened since the beginning of the year. Fixed income markets, at the end of the quarter, have removed expectations of a Fed rate cut for this year.

a. Chairman Powell also announced that he would remain as the Chairman until his successor is officially confirmed, which could extend beyond the end of his current term on May 15. This has been the customary action in previous Fed Chair confirmations.

3. What are other central banks doing in this environment?

The Bank of Canada, Bank of England (BoE) and European Central Bank (ECB) all left their rates unchanged in March, and all cited uncertain impacts on their economies from the global energy shock. Inflationary pressures are expected to impact net energy importers like England and the Eurozone more than net energy exporters, but sustainably higher oil prices have the potential to create demand destruction in almost every economy around the world. In fact, several ECB members are prepared to raise rates as early as April if energy prices remain elevated, and market participants are anticipating that the BoE could possibly raise their rate three times this year. Reminding everyone that global monetary policy remains desynchronized, despite six of seven developed central banks holding rates steady in March, was the Reserve Bank of Australia choosing to raise their interest rate for the second meeting in a row. That was a bold move in the face of so much uncertainty and confirms that there is no clear course of action for central banks. There have been some parallels drawn to the 2022 growth scare, and while we believe developed economies broadly are in a better position than 2022, we will be watching for signs of accelerating inflation and/or growth deterioration.

4. Has the risk of recession gone up?

We increased our odds of recession to 45% in March. Although our longer-term thesis hasn’t changed, the unpredictability of war, uncertainties around trade policies and the potential of a private markets credit event are too significant to ignore and create a broader spectrum of potential outcomes. That said, the economic data from the first quarter continues to point to a resilient U.S. economy: the ISM Manufacturing Index expanded the most since 2022 in March; there were stronger retail sales in February versus expectations, as 10 of the 13 categories showed increases; consumer borrowing increased at the slowest pace since early 2025; weekly initial unemployment claims remain at historically low levels; and the Conference Board’s Consumer Confidence Index showed a surprise increase in March. Inflation, however, could potentially slow economic activity, with gauges like the Producer Price Index up +3.4% year-over-year in February before the start of the war.

5. What is the Chief Investment Office monitoring in April?

March started out like a lion, and we are unsure if it will leave like a lamb, but here are three things we are thinking about:

1. The war in Iran creates a lot of uncertainty, and inflation is a natural outcome of higher energy prices, which can have a material impact on global monetary policy. Depending on the duration of the conflict, higher energy prices can also lead to demand destruction for consumers (slower growth). Markets will be waiting with bated breath for signs of de-escalation and/or an opening of the Strait of Hormuz.
2. The Federal Open Market Committee’s (FOMC) meets again on April 29. We don’t anticipate a rate change at this meeting but will be looking for updated commentary on inflation and employment.
3. First quarter earnings season kicks off in earnest on April 10. Our Equity Research Team will be looking to see which sectors, industries and individual companies are still on track to meet or exceed expectations.

Charts of the Month

Why was gold down during the start of the war?

When conflicts arise, gold has historically been a protective harbor from the storm, but this time around, gold was down 11.6% during the first month of the war in Iran. There are three reasons this happened:

1. Gold had been on an unprecedented climb from $2,062.98 at the start of 2024 to an all-time high of $5,595.47 on January 29, 2026. Some of this could have been speculation on the part of investors.
2. The U.S. dollar moving higher tends to have a negative impact on the price of gold.
3. Gold is less attractive in a rising interest rate environment and, as mentioned above, yields on U.S. Treasuries moved significantly higher in March.

Gold, the U.S. Dollar and Bond Yields

Gas prices impact consumers:

The national average price per gallon for regular gasoline hit $4/gallon for the first time since 2022. The $4/gallon level can have a material psychological and financial impact on U.S. consumers. Historically, consumers develop a negative view of the economy as the pain at the pump moves higher. The concern with increases in negativity is it can transition from just how people feel to how people act — and that means slower economic activity. For now, the data suggests the negative perceptions are about feeling versus action.

Gas Price Influence Perceptions