March was a reminder that markets can shift quickly when geopolitical events begin to shape the economic outlook. Over the course of the month, oil prices rose sharply, while US equities, after holding up reasonably well in the first two months of the year, approached correction territory before a month-end rally. At the same time, bond markets offered less stability than investors might typically expect, as renewed inflation concerns contributed to higher rate volatility.

US equity market leadership also narrowed meaningfully in March. Energy was by far the strongest-performing sector and a key driver of value stocks outperforming their growth peers materially. Even with the shift in market leadership that has occurred in the first quarter of the year, corporate profit expectations have remained relatively resilient despite market volatility weighing on valuation multiples. Consensus earnings forecasts still point to healthy growth in 2026, suggesting that the widespread market weakness in March was driven less by a deterioration in the earnings outlook and more by a reassessment of how much investors are willing to pay for those earnings in a more inflation-prone and geopolitically fragile environment.

For the economy broadly, growth expectations have softened but continue to suggest expansion rather than contraction. The Atlanta Fed’s GDPNow estimate for first-quarter 2026 real GDP growth declined from roughly 3% at the beginning of the month to around 2% by month-end. While that represents a meaningful moderation, it remains more consistent with slower growth than with a recession.

The policy backdrop also remains unsettled, as Federal Reserve Chair Jerome Powell stated late in the month that the Fed has not yet determined whether it can afford to look through the economic effects of the conflict. He emphasized that policymakers are closely monitoring energy prices and inflation expectations, while also acknowledging the central bank’s limited ability to offset a supply shock that poses risks to both inflation and growth. At the same time, fiscal policy in Washington continues to provide support, with little apparent appetite for a sharp drop in domestic consumption. That may help explain why markets appeared to price in softer growth rather than a more severe downturn.

Our Perspective

Geopolitical turmoil is inherently difficult to handicap and often leads to short-term market volatility driven more by headlines than by fundamentals, and March was a clear example of that dynamic. In periods like these, the most effective response is rarely to react to each new development or news item, but instead to remain patient, disciplined, and focused on long-term objectives.

Our approach continues to center on holistic risk management, thoughtful portfolio construction, and the flexibility to act opportunistically as conditions evolve. While near-term uncertainty may persist, we believe experienced investment management and time-tested disciplines remain especially valuable in periods when markets are being shaped by fast-moving events and shifting macroeconomic expectations. We remain focused on navigating these conditions with a long-term perspective and a singular commitment to delivering successful outcomes for clients.

Our View

Economic Cycle		The economy continues to give off mixed signals, with growth remaining relatively resilient but the labor market remaining tight. This has been further complicated by the inflationary pressures of the global oil supply shock, and the Federal Reserve faces an increasingly difficult balancing act of supporting a stagnant economy and keeping inflation in check. As it stands now, both fiscal and monetary policy remain generally accommodative to growth.
Stock Market		The US stock market, while volatile but resilient through the first two months of the year, finally hit a tipping point in March as stocks corrected meaningfully. To the extent geopolitically induced volatility abates from here, key dynamics to watch will be the sustainability of the market broadening that began in earnest over the prior couple of months along with the ability of earnings growth to meet expectations and support a bounce in valuation multiples.
Bond Market		As geopolitical uncertainty pushed long-term Treasury rates upward during the month, meaningful uncertainty remains around the tug of war between potentially slowing economic growth and stubborn inflation that will color the policy backdrop going forward. Corporate spreads meanwhile remain near historical lows.
Key Issues on the Radar		Geopolitical Conflict: The war in Iran that has been front and center all of March will likely continue to drive markets until resolution is arrived at and digested. As always with frustratingly unpredictable risks, prudent risk management and patience is crucial during and following the event.
		AI Optimism & Capital Investment: While the AI-dominated market narratives took a backseat in March, the dynamics of industry-dependent optimism, pessimism and skepticism centered around AI remain and will likely to continue to play a key role in market action through the rest of the year.
		Stock Market Rotation: Even accounting for March’s broad market sell-off (except for Energy stocks), the “average” stock has handily beaten the market over the past several months, indicating a meaningful unwind of the market concentration that had defined prior years. To the extent this broadening picks up where it left off, diversified investing will play a critical role in success.

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Source: Federal Reserve Bank of Atlanta.

All investments contain risk and may lose value. This material contains the opinions of Manning & Napier, which are subject to change based on evolving market and economic conditions. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable but not guaranteed.