Hello everyone,
The S&P 500, a barometer of the overall health of the U.S. equity market, demonstrated lacklustre performance for the month of March 2026, down 5.09% (https://ycharts.com/indices/%5ESPX/level) amid a complex economic and geopolitical backdrop. The downturn can be attributed to several interrelated factors. Firstly, the conflict involving Iran significantly impacted global markets. Actions by the United States and Israel in late February resulted in a de facto closure of the Strait of Hormuz, which in turn led to a surge in crude oil prices approaching $100 per barrel (https://www.goldmansachs.com/insights/articles/how-will-the-iran-conflict-impact-oil-prices). This escalation heightened concerns of sticky inflation and the prospect of sustained higher interest rates, adversely affecting capital-intensive sectors such as Industrials and Real Estate.
Secondly, the so-called "AI scare trade" emerged following a substantial rally in 2025. Investors began to reassess the immediate return on investment for artificial intelligence capital expenditures, leading to notable declines in the Information Technology sector, which fell by 4.10% (https://ycharts.com/indices/%5EIXT/level). Notably, Super Micro Computer experienced a particularly sharp drop of 29.7%, exacerbated by regulatory and legal challenges. Additionally, legal risks facing major technology firms contributed to market volatility. A landmark jury verdict found Meta and Alphabet liable in a case related to social media addiction, casting a shadow over the Communication Services sector (https://epic.org/jury-finds-meta-and-google-negligent-in-landmark-social-media-addiction-case/). Although initial financial penalties were modest, the ruling set a precedent that raised fears of increased regulatory scrutiny.
Amid these challenges, the Energy sector emerged as the sole positive outlier, rising by 10.3%. This sector's performance mitigated the broader market decline, preventing the S&P 500 from entering deeper correction territory, even though elevated oil prices continued to exert downward pressure on the remaining sectors. And while investors may have been smiling as "portions" of their portfolios climbed thanks to rising oil prices, those same prices had drivers groaning at the gas station! What was good news for Wall Street was less than stellar for Main Street, as many motorists faced sticker shock when filling up their tanks. Suddenly, every trip felt like a luxury getaway, minus the fun... Lol.
Closer to home, despite the robust rebound on the 31st, the index recorded a 4.6% (https://ycharts.com/indices/%5ETSX/level) decline for the month of March, marking its steepest monthly drop since May 2023. The market recently encountered deeply oversold conditions, especially in growth-oriented sectors such as financials, consumer discretionary, and industrials. After a period of pronounced selling pressure, these sectors began to show signs of a reasonable rebound, with investors gradually returning to areas that had been hit hardest by the downturn. This recovery sparked cautious optimism, as it indicated that certain segments of the market were able to absorb the shocks and regain some momentum.
Nonetheless, questions remain regarding the longevity and strength of this rebound, given the persistent uncertainties in the broader economic and geopolitical environment. While the emergence of a recovery in these sectors is viewed as a positive step toward restoring overall market stability, analysts and market participants continue to monitor whether these improvements will be sustained or if renewed volatility might undermine progress. This ongoing vigilance underscores the importance of resilience and adaptability in navigating current market challenges, as a stable and lasting recovery would contribute significantly to investor confidence and the health of the financial landscape (https://www.bnnbloomberg.ca/investing/market-outlook/2026/03/30/market-outlook-year-two-of-us-presidential-cycle-signals-weakness/). Despite all of this, the first quarter of the year saw the TSX index advance by 3.3% (https://ycharts.com/indices/%5ETSX/level), extending its streak of quarterly gains to seven consecutive periods.
One final note, throughout the first quarter of 2026, the Bank of Canada has consistently opted to maintain its key interest rate at 2.25%. This steady approach was reaffirmed during its most recent policy meeting on March 18, 2026 (https://www.bankofcanada.ca/2026/03/fad-press-release-2026-03-18/), marking not only the second time this year but also the third consecutive instance that the central bank has held the overnight rate at this level. By choosing to keep rates unchanged, the Bank of Canada signaled its commitment to monitoring economic data and inflation trends before making any adjustments.
Looking ahead to April, historically, the stock market has shown a generally positive trend in the month of April. Over the past 34 years, April has been a favourable month for the S&P 500 index, posting gains approximately 76.5% of the time, which is a higher frequency than most other months. The median return for April has been reported around 1.2%, indicating a moderate but consistent appreciation in stock values during this period (https://us.etrade.com/knowledge/library/perspectives/daily-insights/april-stock-market-patterns). Similarly, the S&P 500 has averaged a return of about 1.6% in April with a gain frequency near 68% in certain recent analyses (https://equityclock.com/2026/03/31/stock-market-outlook-for-april-1-2026/).
Historically, April has also been identified as one of the best-performing months, often ranking as the second-best month of the year for stocks according to financial analysts (https://fortune.com/2021/03/31/stock-market-update-outlook-april-2021-history-stocks/). Market volatility tends to decrease during April compared to previous months like March, with indices such as the VIX (volatility metric) generally contracting on average (https://www.stonex.com/en/insights/03-31-2025-market-seasonality-report-sp-500-nasdaq-100-vix-wti-oil-gold/), but we'll just need to keep an eye on it. However, I am putting a caveat on all of this as this trend does not guarantee gains every year; for instance, some recent Aprils have seen pullbacks, with the S&P 500 dropping by over 4% in certain years due to shifts in investor sentiment and macroeconomic factors (https://www.jmgfinancial.com/why-did-stocks-pull-back-in-april/).
To wrap it up, the S&P 500 struggled, dropping 5.09% amid turbulence fueled by geopolitical tensions in the Middle East, surging oil prices, and legal pressures on major technology firms. The "AI scare trade" led to reversals in tech stocks, while sectors like Industrials and Real Estate suffered under fears of persistent inflation and higher interest rates. The Energy sector was the lone bright spot, soaring 10.3% and helping offset broader market losses, though elevated gas prices were tough on consumers. Lastly, the Bank of Canada maintained its key interest rate, signaling a wait-and-see approach and April is historically a strong month for the S&P 500, but recent years have shown it's not always a guarantee of gains.
As we approach Easter, investors might be "hopping" the market will deliver some sweet surprises. But, just like hunting for hidden eggs, sometimes you find a golden one and sometimes it’s just another empty shell! In the end, patience, resilience, and a little humour can help weather both the ups and downs of the market
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