General Market News

Top-performing mutual funds are significantly reducing positions in 10 major stocks, led by Alphabet, MercadoLibre, and Warner Bros. Discovery, according to Morningstar analysis. The selling activity signals concerns about AI spending returns and reflects significant sector rotation beneath the surface of stable market indexes. The analysis focused on actively managed funds with Morningstar's highest ratings (gold, silver, or bronze) holding 50 or fewer stocks.

• Alphabet is being sold despite heavy AI investments, with some fund managers questioning whether massive spending on AI chips and large language models will generate adequate returns
• MercadoLibre faces fund redemptions despite solid earnings growth, while Warner Bros. Discovery sells reflect the Paramount Skydance acquisition removing upside potential
• Other major sells include Apple (-4.4% YTD), TE Connectivity (-9.3%), and American International Group (-9.3%), while some sold stocks like ASML (+24.5%) and Deere (+28.8%) have performed strongly year-to-date

QPlay, a hybrid board games developer, will become the first company to list on Britain's new PISCES private stock market, operated by JP Jenkins. PISCES is a new regulatory framework introduced in 2024 to boost investment in private companies and revitalize London's capital markets after declining IPO activity in recent years.

• PISCES (private intermittent securities and capital exchange system) allows companies to enable intermittent trading of shares while remaining private, without full public listing requirements
• JP Jenkins won approval to operate a PISCES market and will conduct the first liquidity event, with the London Stock Exchange also approved and planning its inaugural deal after QPlay's
• The initiative is part of broader UK capital markets reforms aimed at increasing growth and IPO rates in London, competing with similar platforms like Nasdaq's long-established private market segment

Bill Ackman's Pershing Square hedge fund has filed for an initial public offering on the New York Stock Exchange under the ticker symbol 'PS'. The move represents an effort by the outspoken investor to take his investment firm public, following a model similar to Warren Buffett's approach.

• The filing was submitted on Tuesday for listing on the NYSE
• Pershing Square will trade under the ticker symbol 'PS'
• Ackman has expressed aspirations to emulate Warren Buffett's investment model

Historical analysis by TrendSpider shows the S&P 500 has typically rallied strongly in the year following major Middle East conflicts, with gains ranging from 23% to 36% in most cases since 1979. Despite current tensions with Iran pushing the S&P 500 down nearly 1% year-to-date to 6,795, the pattern suggests the current dip may represent a buying opportunity for long-term investors.

• After the Gulf War (1990), Iraq War (2003), and Israel-Hamas conflict (2023), the S&P 500 gained 23%, 33%, and 36% respectively over the following 12 months
• Oil prices have spiked in the current crisis, benefiting energy stocks like Exxon and Chevron, while defense contractors including Northrop Grumman and Lockheed Martin have risen on military spending expectations
• A prolonged conflict could push Brent crude above $130, triggering inflation shocks and recession risks, while a short escalation lasting 4-6 weeks would likely see oil stabilize near $70 with limited economic impact

Younger Americans are more optimistic about the economy than older generations, with millennials scoring highest (60.7) on the PYMNTS Consumer Expectations Index compared to baby boomers and seniors (53.5). The generational divide reflects differing economic reference points: younger workers anticipate wage growth to offset recent inflation over their careers, while older Americans compare current conditions unfavorably to their peak earning years in stronger economic periods.

• As of February 2026, the average American scores the economy at 56.5 (slightly above neutral 50), with millennials most optimistic at 60.7 and baby boomers/seniors least optimistic at 53.5
• Younger generations expect decades of work life ahead will allow wages to eventually compensate for recent inflation, while older Americans lack this runway and remember stronger economic periods like the 1990s boom
• Despite sentiment differences, real economic data shows mixed signals: unemployment rose to 4.3% from 4.0% year-over-year, but real wages increased 3.9% in 2025, outpacing inflation of 2.4%, though consumer debt climbed 3.3% to $5.1 trillion

U.S. markets rebounded Tuesday after President Trump suggested the Iran war could end 'very soon,' though he also threatened to seize control of the Strait of Hormuz if oil flow is disrupted. Oil prices declined on the comments while Asian markets rallied, with South Korea's Kospi up over 5%. The conflict has prompted South Korea to impose fuel price caps and raised concerns about the Bank of England delaying planned rate cuts.

• Trump stated the war is 'very complete, pretty much' but warned of escalation if Iran blocks oil through the Strait of Hormuz, which Iran said tankers 'must be very careful' navigating
• South Korea implemented its first fuel price cap in 30 years as gasoline prices surge, with the government exploring energy import diversification
• Prediction markets on the Iran war sparked backlash, with Polymarket reportedly deleting nuclear detonation odds after online outcry and removing nuclear-related markets

The U.S. federal budget deficit reached $1 trillion in the first five months of fiscal year 2026, according to the Congressional Budget Office. The deficit decreased 14% compared to the same period last year, driven by an 11% increase in federal tax revenue to nearly $2.1 trillion, while federal spending rose 2% to just over $3.1 trillion.

• Customs duties surged $109 billion (308%) to $144 billion due to higher tariff rates, though collections may face refunds after a court ruled Trump administration tariffs unconstitutional
• Social Security spending increased $48 billion (8%) to $676 billion, driven by cost-of-living adjustments and the Social Security Fairness Act's benefit expansion
• Net interest costs on the national debt jumped $31 billion (8%) to $433 billion, reflecting larger debt levels and higher interest rates

Federal Reserve officials are closely monitoring the Iran conflict due to its potential impact on inflation through rising energy prices. Oil prices briefly surged above $100 per barrel and gasoline prices have increased, which could complicate the Fed's plans for interest rate cuts. Multiple Fed presidents have expressed caution about adjusting monetary policy until more data becomes available on the conflict's economic impact.

• Oil prices spiked over $100 per barrel amid fears of supply disruptions through the Strait of Hormuz, pushing up consumer gasoline prices
• Minneapolis Fed President Neel Kashkari is now less confident in his forecast for one rate cut this year due to geopolitical uncertainty
• The Fed's next FOMC meeting is March 17-18, with markets showing 97.4% probability of no rate change from the current 3.5%-3.75% range

Traditional bond investing is being challenged by current market conditions that diminish bonds' historical advantages. With inflation expectations at 3.4-3.7%, investment-grade bonds offering 4.4% yields face low real returns, reduced diversification benefits, and non-competitive income compared to cash and dividend stocks. The analysis suggests investors may need to reconsider the traditional 'own your age in bonds' retirement strategy.

• Real expected returns for investment-grade bonds may be less than 1% over ten years (4.4% yield minus 3.7% expected inflation)
• Stock-bond correlation has reached a record high of 0.6 on a rolling five-year basis as of September 2025, limiting bonds' diversification benefits during elevated inflation periods
• Investment-grade bonds yield only 4.4%, barely exceeding Treasury bills and dividend stocks, while carrying greater interest rate risk

The Dow recovered from an 800-point drop to close up 239 points on Monday following reassuring comments from President Trump about the Iran conflict, though stagflation fears persist. Oil prices, which briefly topped $120 per barrel before closing at $94.77, are driving concerns about a toxic mix of high inflation and slow economic growth. Experts warn oil could surge past $150 per barrel if the conflict continues for several more weeks, potentially triggering a 1970s-style stagflation crisis.

• Oil price volatility caused West Texas Intermediate crude to briefly exceed $120 per barrel before settling at $94.77, with experts warning prices could hit $150 if the Iran conflict extends another 4-5 weeks
• National average gas prices reached $3.48 per gallon as disruptions in the Strait of Hormuz blocked 20% of global oil supply; each $1 oil increase typically adds 4 cents per gallon at the pump
• JPMorgan analyst warned the escalating Iran conflict could drive the S&P 500 down 7% to about 6,270, though experts say prices could normalize quickly if military operations end within a month

US stocks reversed sharply on Monday after President Trump stated the US-Israel war against Iran is 'very complete,' with the Dow swinging from a 945-point loss to close nearly 240 points higher. The comments eased geopolitical fears and triggered an oil price pullback from above $100 per barrel, relieving stagflation concerns that had gripped markets.

• The Dow closed up 240 points at 47,740.74, S&P 500 gained 0.8%, and Nasdaq rose 1.38% after Trump's remarks dismantled the oil-driven inflation narrative
• Operation Epic Fury, which began ten days ago and struck over 3,000 targets, is reportedly ahead of Trump's original four-to-five week timeline
• Tuesday's market open will be crucial to determine if investors take Trump's informal comment seriously or if the rally was merely a temporary reprieve from selling pressure

Oil prices surged over $100 per barrel following U.S.-Israeli military strikes on Iran, raising concerns among U.S. stock investors about potential economic damage and market downturns. The 50% jump in crude prices from late February levels is driving stock volatility higher, with the S&P 500 down nearly 4% from its January peak. Analysts warn the duration of the conflict will determine whether markets face a correction or more severe recession.

• U.S. crude jumped from $67.02 on February 27 to over $100 on March 9, with Monday trading briefly approaching $120 per barrel—the highest level in more than three years
• Each 10% increase in oil prices could drag GDP growth by 15-20 basis points, according to JPMorgan economists, while gasoline prices rose to $3.478 per gallon from $2.902 a month earlier
• The correlation between the S&P 500 and crude oil reached -0.813, indicating a strong inverse relationship, while the Cboe Volatility Index topped 30 for the first time in nearly a year

Financial experts warn that investors may be underestimating market risks despite recent volatility, with crude oil surging past $100 per barrel and the VIX briefly hitting fear levels. Allianz's Mohamed El-Erian cautions that the global economy faces 'more violent and frequent shocks' in 2024, while investors appear to price in only an 80% chance of temporary disruption. Ed Yardeni projects a potential 10-15% correction in the S&P 500.

• Deutsche Bank notes investors have become 'inured' to short-term disruptions after a 'profusion of shocks' over the past four years, with equity positioning dipping only slightly below neutral despite mounting risks
• U.S. crude prices surpassing $100 per barrel historically signals recession risk, according to DataTrek, while Polymarket bettors assign a 74% probability the S&P 500 stays above 6500 this month (less than 5% decline)
• Closure of the Strait of Hormuz threatens one-third of global fertilizer supplies and nearly half of exported urea, potentially disrupting spring planting across major agricultural economies

U.S. financial markets advanced in Q4 2025 amid moderating inflation, softening labor conditions, and increasing scrutiny of AI infrastructure investments. Markets shifted toward quality assets and selectivity as investors balanced AI enthusiasm with concerns over corporate leverage, profitability, and rising unemployment. The quarter was marked by resilient corporate earnings, cautious Fed policy, and heightened sector dispersion.

• Unemployment rose to 4.6% with layoffs across technology and retail sectors, prompting investors to prioritize quality assets and balance-sheet strength over momentum plays
• Financials outperformed with the six largest U.S. banks gaining approximately $600 billion in combined market cap, supported by deregulation and renewed investment banking activity
• AI sector sentiment became more selective as investors questioned ROI and profitability; Nvidia benefited from hardware demand while Oracle and Broadcom faced scrutiny over debt levels and slowing revenue growth

Oil prices surging to $100 per barrel combined with a stagnant job market have raised stagflation concerns for the U.S. economy. The February jobs report showed only modest hiring while unemployment rose to 4.4%, and inflation remains at 3%, above the Federal Reserve's 2% target. The dual threat of high inflation and slow growth complicates policy responses, as traditional stimulus measures could worsen inflation.

• U.S. crude oil crossed $100 per barrel for the first time since 2022 amid Iran tensions, while total 2025 job growth was just 116,000 - less than the prior year's monthly average
• Markets have pushed back expectations for Fed rate cuts from June to September at earliest, with implied fed funds rate of 3.21% by year-end versus current 3.64%
• Economists place stagflation odds at 35%, with the key factor being duration - if oil prices remain elevated long enough, it shifts from an inflation shock to a growth scare

Oil prices surged above $100 per barrel on Monday, approaching a four-year high, as the war in Iran disrupted global oil flows and closed the Strait of Hormuz, through which about 20% of the world's oil passes. The sustained price increase, up 40% since U.S. and Israeli strikes began, threatens to aggravate inflation and slow economic growth, with some analysts warning that prices above $140 could trigger a U.S. recession.

• Bank of America warns that oil prices persistently above $100 per barrel would reduce GDP growth by more than 60 basis points, while a doubling to $140 could cause a recession
• Analysts predict prices could reach $110-$150 per barrel depending on how long Iran's closure of the Strait of Hormuz lasts, with estimates ranging from two weeks to four months
• U.S. consumers face a 16% increase in gas prices over the past week, the sharpest rise since Russia's 2022 invasion of Ukraine, while airline and cruise line stocks have dropped 14-20% since the war began

Investors are bracing for a potential stagflation scenario as Middle East conflict drives oil prices above $100 per barrel, raising fears of 1970s-style economic disruption with high inflation and weak growth. Central banks face a difficult choice between hiking rates to combat inflation or supporting faltering economies. The crisis hits Europe and Asia harder than the U.S., which is more self-sufficient in energy and commodities.

• Brent crude jumped above $100/barrel, up 70% year-to-date, with analysts noting a 5% oil price rise adds 0.1 percentage points to developed market inflation and a persistent 10% increase reduces global GDP by 0.1-0.2%
• Markets now price at least one ECB rate hike this year versus a 40% chance of a cut before the war, while UK two-year gilt yields surged 50 basis points in one week, the worst sell-off since the 2022 budget crisis
• U.S. markets outperformed with the S&P 500 down 2% last week compared to 5.5% drop in Europe and 6.3% fall in Asia Pacific, as America's energy self-sufficiency provides relative insulation from the commodity shock

This article explains how correlation, a key financial metric measuring co-movement between assets, is often misunderstood by investors who assume it remains static over time. During market stress periods like 2008 and 2022, traditional diversification failed as most assets declined together, rendering historical correlations ineffective. Tactical strategies that can shift to cash aim to reduce reliance on static correlation assumptions and provide diversification when it's needed most.

• Correlation between stocks (S&P 500) and bonds (10-Year Treasury) is dynamic and shifts significantly over time, particularly when inflation rises above 3%, causing both asset classes to move together rather than providing hedge benefits
• Traditional diversified portfolios failed during crisis years: in 2008, only U.S. Treasury bonds had positive returns (~30%), while in 2022, only commodities finished positive as stocks and bonds declined together
• Potomac's Bull Bear strategy demonstrates adaptive correlation management, ranging from -32.37% correlation (defensive during declines) to 97.85% correlation (participating in bull markets), compared to a long-term average of 0.51 with the S&P 500

The U.S. and China exchanged accusations at a U.N. drugs meeting in Vienna, with Washington blaming Beijing for failing to stop fentanyl precursor chemical sales and China calling the U.S. irresponsible. The clash highlights ongoing tensions over a deal struck last year where the U.S. reduced tariffs in exchange for China cracking down on the illicit fentanyl trade.

• White House drug policy director Sara Carter accused China of manufacturing 'millions of tons' of fentanyl precursor chemicals with weak export controls that enable drug cartels
• The U.S. Supreme Court invalidated a 10% fentanyl-related tariff on China last month, but the Trump administration plans to reimpose the levy under different legal authority
• China's envoy dismissed U.S. claims as false and criticized Washington for 'unilateral bullying' and using sanctions and tariffs to 'shift blame' rather than addressing domestic drug control

Donoghue Forlines' January 2026 market commentary reflects on 2025's strong performance across most asset classes, with gold excelling and the U.S. dollar weakening. The firm is entering 2026 with increased equity exposure, particularly in mega-cap stocks, while reducing fixed income allocations in anticipation of pro-growth policies under Trump's administration. Despite rich valuations, especially in the S&P 500, the investment team remains optimistic about corporate profit growth driven by tax incentives.

• The Federal Reserve cut rates by 25 basis points in September, October, and December 2025, ending the year with Federal Funds Rate at 3.5-3.75%, with two more cuts choreographed for 2026
• The S&P 500 is trading at expensive levels relative to its historical 20-year forward average multiple, while smaller-cap U.S. stocks, international equities, and value stocks show more attractive valuations
• Donoghue Forlines increased exposure to the DF Tactical 30 ETF for mega-cap concentration and shifted fixed income holdings toward high-yielding credit (bank loans and high yield bonds) while reducing higher-quality, lower-yielding positions