The financial markets suffered through a rough week as stocks, bonds, and gold all finished sharply lower. The ongoing conflict in Iran coupled with a much weaker than expected jobs served to turn up market volatility and put a number of market levers in motion. For now, the focus isn’t on individual companies or market sectors. It’s about how geopolitics and labor market dynamics could damage the macroeconomic environment.
Tip of the Week
If this past week made you uncertain of what to do next, it’s a good idea to think about how a high-yield savings account could be part of your planning process. Whether you’re building up your emergency fund or just looking for a place to lay low when market conditions get rough, earning a competitive return with your idle cash can be a win for your portfolio.
» Earn more on your savings: Explore top high-yield savings accounts today
SoFi Checking and Savings Openbank High Yield Savings CIT Bank Platinum Savings APY Up to 4.20% With eligible direct deposit. No minimum balance required. APY Up to 4.15% $0 min. balance required for APY. APY Up to 4.10% $5,000 min. balance required for APY. Promotion Up to $400 bonus + 0.90% APY boost six-month APY boost for new customers with eligible direct deposit. Offer ends by 12/31/2026. Terms apply. Promotion 0.35% APY boost six month APY boost for new customer when you open and fund a new account by 11/03/2026. Promotion 0.35% APY boost Enter promo code "CITBOOST" to receive a 0.35% APY boost for six months from account opening. Terms apply. on SoFi's website our partner on CIT Bank's website
Market Moves
Weekly Market Snapshot:
- S&P 500: -2.0% – the war-driven selloff continued throughout the week and was pressured by rising oil prices, inflation concerns, and Friday’s unexpectedly weak payroll report.
- Nasdaq 100: -1.2% – tech stocks actually held up pretty well last week even though every one of the magnificent 7 stocks is in the red on the year.
- Russell 2000: -3.9% – small-caps continue to sharply walk back their strong start of the year and are now only narrowly outperforming the S&P 500 year-to-date.
- VIX: 29.5 – volatility is near levels we haven’t seen since Liberation Day; the markets are fearing a lengthy conflict in the Middle East that could disrupt global trade for weeks.
- Gold: -2.3% – the fact that gold moved lower even as stock prices fell could be a sign that investors are selling more broadly and not just selectively.
- 10-Year Treasury Yield: 4.14% – yields shot much higher this week after the conflict in Iran and subsequent disruptions to the energy raised inflation fears.
Drivers:
Market sentiment is being heavily driven by the geopolitical backdrop. The markets reacted initially as if this were going to be a short-term event. As it drags on further with no apparent end in sight, investors grow more weary of its impacts, including energy disruption and higher inflation risk. Those factors drove losses in all of the major asset classes even as some of the latest data indicated strength in the U.S. economy. The February non-farm payroll report, however, shows that companies are still pessimistic and recession risk is elevated.
Economic Highlights
A couple of the notable themes that stood out this week:
The Iran Conflict and All of Its Side Effects
The war in Iran has thrown a wrench into the U.S. market and economic outlook at a time where there was already plenty to think about.
The most visible impacts came on the inflation and energy fronts.
The Strait of Hormuz, a major shipping lane through the Middle East, has come to a virtual standstill and several countries in the region have already altered their production and trade plans. Supply chain disruption risk has already spooked the energy markets and threatens to undo recent progress made on pricing pressures. Treasury yields moved sharply higher in response to increased inflation risk and offered no protection for investors seeking a safer spot for their money.
Brent crude oil prices, which started the week around $70 a barrel, were up to $92 on Friday. That’s the highest they’ve been since September 2023.1
Source: Barchart.
This is a fairly standard reaction to geopolitical pressures, but the sharper than average rise in oil prices demonstrates how the markets believe this conflict will be longer, not shorter. This is not the thing that consumers need right now either. Shortly, these higher oil prices are going to trickle down into gas prices. Any sharp increase at the pump is going to impact consumer behavior at a time when many are already struggling to make ends meet.
» Want to research further on your own? Explore our top financial tools and resources now
The Jobs Market Goes from Concerning to Potentially Threatening
The February ADP employment report, which measures private sector activity, showed a solid 63,000 job gain and created optimism for Friday’s headline non-farm payroll report.2 The momentum didn’t carry over though and the NFP report delivered a 92,000 job loss. That was way below expectations for a gain of 59,000 and the 5th time in the last 9 months that this figure has been negative.3
Source: BLS.
The U.S. labor market is clearly in some trouble here. Wage growth and job quits data are showing the same thing. A few years ago, workers were able to secure big pay increases by changing jobs in a tight labor market. Today, workers are clearly hanging on to the jobs they have because 1) there’s little financial incentive without the salary increase potential and 2) they’re hanging on to what they have due to the uncertainty that comes from being low on the totem pole elsewhere.
This kind of jobs market stagnation is what we often see historically in recessionary periods. GDP growth, the most common measure of whether or not the U.S. economy is in recession, still looks fine for now. But there are enough warning signs to suggest that this could change quickly in the not so distant future.
» Work with expert advisors: See how Vanguard Personal Advisor can help
The Comeback in the Manufacturing Sector
There was some positive news this week though.
The ISM Manufacturing PMI report showed solid expansion in this sector for the 2nd straight month, something that we haven’t seen since mid-2022.4
Ever since we came out of the COVID area when people spent all of their free money on “things” because everything was closed, the manufacturing sector has struggled. Consecutive months of strong growth in the sector tend to, historically at least, be sticky. The report delivered everything you’d want it to as well – growing imports, growing exports, growing new orders. Employment was on the weaker side, but we’re seeing that in a number of areas right now.
This could add an important layer of support for U.S. economic activity that’s been working without it for years.
» Reduce your tax burden: Explore the best tax relief services
The Week Ahead
A few themes to watch next week:
In Summary
The markets are growing more tense as the events in Iran are taking their toll on investor optimism. Choppy markets with higher highs and lower lows are normal for this kind of environment and investors shouldn’t overreact to one big up day. The CPI report this coming week should be watched closely. If it shows inflation rising while the labor market is slowing, it could create a stagflationary regime that is usually bad for both stocks and bonds.
» Ready to start investing today? Explore top brokerage accounts with our detailed review
