Global markets experienced broad declines in March as geopolitical tensions intensified, driven by developments surrounding Epic Fury in the Middle East. The S&P 500 Index fell 5.09%, bringing its first-quarter performance to -4.63%, while global equities also weakened, with the MSCI World Index declining 6.55%. Market performance reflected a pronounced rotation toward defensive positioning, with value stocks outperforming growth as investors sought stability amid heightened volatility. The NASDAQ 100 declined 4.89%, continuing the shift away from high-valuation, AI-driven technology and mega-cap stocks. Precious metals, which had previously provided support, reversed sharply, with gold falling over 10% and silver declining more than 19%. Sector performance reflected the risk-off environment, with energy, industrials, and consumer defensives leading, supported by rising oil prices and demand for “real economy” assets, while technology, healthcare, and communication services lagged.
Economic activity increased at a slight to modest pace, though underlying conditions remained mixed. Consumer spending rose modestly overall but showed increasing sensitivity to economic uncertainty, particularly among lower-income households. Manufacturing activity improved, supported by demand linked to energy infrastructure and data center expansion. Labor market conditions remained stable, with employment largely unchanged as firms focused on replacing existing roles rather than expanding headcount. Wage growth continued at a moderate pace, driven in part by competition for skilled labor in key sectors. At the same time, tariff-related cost pressures persisted, with firms either passing costs to consumers or absorbing them due to pricing sensitivity.
Housing activity softened, with declines in residential sales, construction, and lending activity reflecting affordability challenges and limited inventory. Banking conditions remained stable to improving, supported by steady demand for consumer and commercial credit. The Federal Reserve maintained the federal funds rate at 3.50%–3.75%, noting that economic activity continues to expand at a solid pace while inflation remains somewhat elevated. Despite near-term volatility, outlooks for economic activity remained mildly optimistic, with expectations for modest growth in the coming months, albeit alongside continued uncertainty and uneven sector performance.
