March 2026 Market Update

Economic Highlights

United States

• Fourth-quarter GDP was revised down to just 0.7% growth, well below the 1.5% estimate and previous reading of 1.4%. It also marked a considerable slowdown from the 4.4% gain in Q3, hampered by a record-long government shutdown that saw government spending tumble 16.7%. The downward revision came due to adjustments in consumer and government spending and exports. A decline in imports, which technically subtract from GDP, also was less than the previous estimate. Consumer spending rose 2% for the quarter, down from the earlier 2.4% projection, which represented a decline from the 3.5% increase in Q3.
• February’s CPI report was in line with expectations and perhaps the last one to reflect cooling inflation. Headline prices rose 0.3% M/M or 2.4% Y/Y. Core CPI increased 0.2% M/M or 2.5% Y/Y. Rent rose just 0.1%, the smallest monthly increase since January 2021. In contrast, the PCE Index rose 2.8% in January, with core PCE increasing 3.1%.
• The U.S. economy shed 92,000 jobs in February, well below the expectation for a 50,000 gain. This marked the third time in five months that the economy lost jobs. Health care, the primary growth driver in payrolls, saw a loss of 28,000, due largely to a strike at Kaiser Permanente that sidelined more than 30,000 workers in Hawaii and California. Average hourly earnings increased 0.4% for the month and 3.8% from a year ago, both 0.1% above forecast. The broader U6 unemployment rate fell to 7.9%. One additional area of concern was the labor participation rate, which dropped to 62%, its lowest level since December 2021.
• New orders for durable goods treaded water to start off the year, remaining unchanged from December. The tepid reading was driven by a 0.9% decline in transportation equipment — particularly a 23.7% drop in defense aircraft. Transportation is a notoriously volatile category, so the preference is to focus on orders excluding transportation for a better check on the broader economy. Orders excluding transportation rose 0.4% in January and 5.7% Y/Y. Orders for commercial aircraft and fabricated metal products rose in January while orders for defense aircraft and autos declined. The government calculates business investment for GDP purposes by using shipments of non-defense capital goods excluding aircraft. This measure declined 0.1% in January.

Non-U.S. Developed

• Flash composite PMI data from the eurozone pointed to a near-stalling of output growth in the private sector amid a reduction in new orders. The rate of input cost inflation accelerated sharply following the outbreak of war in the Middle East to the fastest in just over three years. The war also caused disruption to supply chains, with manufacturers reporting the most marked lengthening of suppliers' delivery times in over three-and-a-half years. Meanwhile, companies scaled back employment marginally and were much less confident regarding the outlook for output over the coming year than had been the case in February.
• The headline reading of 50.5 was down from 51.9 in February, with most of the slowdown in growth attributed to service sector softness. The survey data are indicative of eurozone GDP growth slowing to a quarterly rate of just below 0.1% in March, with the forward-looking indicators pointing to a heightened risk of a downturn in the coming months.
• Japan's economy grew faster than initially estimated in Q4 versus the prior quarter, based on revised data from Japan’s Cabinet Office. The economy expanded an ​annualized 1.3% in Q4, compared ⁠with the initial estimate of 0.2%. Private consumption, which accounts for more than ‌half ⁠of Japan's economy, increased 0.3%, versus a 0.1% uptick in the preliminary data. Businesses' capital expenditure rose 1.3% in ​Q4, ⁠revised up from the initial estimate for a 0.2% rise. Finally, external demand, or exports minus imports, was unchanged from the preliminary data ⁠of ​no contribution to GDP. ​Domestic demand contributed 0.3%, revised up from zero ​contribution.

Emerging Markets

• China’s manufacturing sector rebounded in March, posting its fastest pace of activity in more than a year. The official manufacturing PMI increased from 49.0 in February to 50.4 in March. The report showed that production and new orders expanded while the measures on raw materials inventory, employment and delivery time remained in contraction territory. In the first two months of this year, China’s exports surged 21.8% from a year earlier, sharply beating expectations, as robust demand from Southeast Asia and Europe more than offset the slump in U.S.-bound shipments.
• The official non-manufacturing PMI, which measures activity in the services sector such as tourism, rose to 50.1 from 49.5 in February.
• India's GDP growth is expected to moderate to 6.5% in FY27 from the projected 7.5% in FY26, owing to the adverse impact of elevated energy prices and concerns around energy availability. While energy dependence could have a negative impact on the Indian economy, lower tariffs, policy rate cuts, subdued food inflation and an improved farm sector outlook could provide an added boost to GDP growth.
• Brazil’s battle against inflation finally paid off in February, with headline inflation falling to 3.8% (down from 4.4%). The decline was driven primarily by base effects in housing and electricity, where Y/Y increases fell sharply from 10% to 5.7%. However, the monthly reading tells a different story, with consumer prices rising 0.70% in February — the largest M/M increase in a year. The conflict in Iran and Brent crude above $110 introduce yet another inflationary shock that could plague countries across the globe.

Sector Performance – S&P 500 (as of 3/31/26)

Sector Performance – Russell 2000 (as of 3/31/26)

Sector Performance – MSCI EAFE (as of 3/31/26)

Sector Performance – MSCI EM (as of 3/31/26)

Disclosures

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