Weekly Newsletter: March 9, 2026
“Giant steps you’ll take, walking on the moon.” Giant leaps in price are what you’ll experience in the oil markets. As the price of oil jumps 50% just since Valentine’s Day, the ongoing conflict could see oil prices well over $100 a barrel before long. Prices have already moved higher at the pump, even though the oil that is currently being refined and in the tanks at the station is oil purchased at well below current prices. The US economy is not as dependent on oil and gas as it was 50 years ago. Today, the US is a net exporter of oil around the world. That will not help the pump price in the weeks ahead. It will also push up the various inflation measures, potentially forcing the Fed to sit on its hands for another meeting or two. The decision to cut rates got a bit more complicated with the release of the latest jobs data, showing a loss in jobs and a tick higher in the unemployment rate. The only saving grace may be that wage growth continues to outpace the (current) inflation rate. Retail sales, a good indicator of the willingness to spend money, were higher. However, sales are now running at the rate of inflation, meaning the basket is not getting bigger, just more expensive. The consumer price index will be reported this week, but it will not incorporate the recent developments in the Middle East and will likely be discounted as a result. The focus has shifted from worries about AI and some unraveling in the private credit sector to solely energy prices and the potential ripple effect through the economy. The longer oil prices defy gravity, the better chance the economy will get pulled down.
Is the job market weak or merely blah? There was plenty to worry about in the monthly jobs report, from job losses in key economic sectors to longer times to find a job. Job openings have been falling over the past year as well, leading many to point to a low hiring/firing job situation. The weekly jobless claims have been pointing to a still decent job market, as the data remains well within historical ranges that have defined a good job market. The retail sales figure is a bit more problematic, as over the past year, spending has been on pace with inflation. IF inflation does trend higher, due in large part to energy, it should have a negative impact on spending, even as the average worker is getting a nice salary bump on a year over year basis. The consumer price index is due this week and is likely to show still 2.5%ish inflation heading into much higher energy prices. The Fed decision on the 18th will be a tough balancing act, whether to focus more on rising unemployment or rising inflation. Will they see the energy spike as “transitory” or impacting the economy well beyond the next few months? That answer will likely instruct them on their next move.
Yields have been reacting to the higher prices for energy by rising right alongside. Yields, which dipped below 4% on the 10-year bond, are getting toward 4.15%. Higher energy and interest rates have generally been a problem for stock prices going forward, so both should be watched closely. The increase in spreads between high-yield and treasuries is also getting to a breaking point, where risks in corporate bonds are rising. That too can be trouble for stocks as investors look toward more “safe” investments like treasuries and money markets.
Quietly, the rotation toward “everything else” but technology has been getting reversed over the past two weeks. Many of the tech names that have struggled this year have bounced over the past few weeks as investors’ focus shifts toward the Middle East. International stocks, once up 15% for the year, are now close to unchanged for the year. Small and mid-cap stocks, too, have reversed most of their early-year gains. What looked like a promising rotation toward the neglected areas of the market for the past 10+ years has been dusted (at least temporarily) in just a few weeks. To be sure, the overall market is likely to struggle as interest rates and oil prices rise. A stronger dollar, acting as a safe haven, could also be a problem for US stocks as their overseas profits do not look as rosy once they are translated back to a strong dollar. One glimmer of hope in the markets has been the daily resilience of the averages. Three times this past week, they opened over 1% lower only to finish the day well above those lows. Historically, these “events” have come as the markets are attempting to bottom.
Consumer prices will get some attention this week, but the ongoing war in the Middle East is likely to stay on the front of investors’ minds all week.
The opinions expressed in the Investment Newsletter are those of the author and are based upon information that is believed to be accurate and reliable but are opinions and do not constitute a guarantee of present or future financial market conditions.