March 2026 Market Review

Fidelity Bank – Wealth Management

March 2026

William J. Fennie III, CFA

Market Recap – March 2026

March proved to be a sharp inflection point for markets, as the escalation of the conflict between the United States and Iran introduced a meaningful geopolitical shock and became the dominant driver of volatility. Risk assets sold off broadly as investors reassessed global growth, inflation risks tied to energy markets, and the trajectory of monetary policy amid rising uncertainty. U.S. equities declined materially, international markets followed suit, and fixed income markets experienced renewed pressure as rate volatility increased alongside geopolitical risk premiums. Commodities were the clearest beneficiaries, with energy prices surging on concerns around supply disruptions and regional instability.

Equity

U.S. equities declined sharply in March amid heightened volatility related to the Iran conflict. Headline equity declines obscured continued dispersion beneath the surface. Growth‑oriented segments bore the brunt of the selloff, while value and defensive areas were relatively more resilient. Small‑cap stocks declined alongside large caps but modestly outperformed as investors differentiated between balance‑sheet strength and rate sensitivity. International equities fell sharply as well, with emerging markets particularly impacted by risk‑off sentiment and currency volatility.

The S&P 500 fell 4.98%, reflecting broad‑based selling pressure. Growth stocks underperformed as rate sensitivity and valuation concerns intensified, with Russell 1000 Growth down 5.21%, while Russell 1000 Value fell 4.82%, demonstrating relative resilience.

Small‑cap equities also moved lower but modestly outperformed large caps. The Russell 2000 declined 5.00%, with notable dispersion between styles: small‑cap growth fell 6.30%, while small‑cap value declined 3.64%.

International equities which saw strong outperformance in January and February, experienced even steeper drawdowns. MSCI EAFE declined 10.29%, with growth stocks particularly pressured (Growth: -11.83%; Value -8.90%). MSCI Emerging Markets fell 13.06%, reflecting heightened risk aversion, currency weakness, and sensitivity to the global growth outlook. Japan, which had been one of the best performing countries, was not spared, with MSCI Japan down 12.42% in U.S. dollar terms.

Sector performance reflected the geopolitical backdrop. Energy was the clear outlier, with the Energy sector rising 10.28% as oil prices surged on supply concerns. Outside of energy, equity performance was broadly negative. Defensive and cyclical sectors alike declined, including Technology −4.07%, Consumer Discretionary −6.57%, Industrials −8.44%, Materials −6.04%, Health Care −8.11%, and Consumer Staples −8.42%. Rate‑sensitive areas also struggled, with Real Estate down 6.20%.

Fixed Income

Fixed income markets struggled, as rising yields and spread widening outweighed flight‑to‑quality dynamics. The Bloomberg U.S. Aggregate Bond Index declined 1.76%, weighed down by rising yields and widening spreads. U.S. Treasuries fell 1.74%, as inflation concerns tied to energy markets offset safe‑haven demand during periods of escalation. TIPS declined 1.34%, reflecting higher real yields despite elevated headline inflation risks.

Credit markets re‑priced risk more aggressively. Investment‑grade corporates fell 1.98%, while high yield declined 1.18% as spreads widened in response to geopolitical uncertainty and tightening financial conditions. Emerging‑market local‑currency debt experienced pronounced weakness, with the index down 5.69%, reflecting currency depreciation and capital outflows.

Municipal bonds also declined, with the Bloomberg Municipal Bond Index falling 2.32%, pressured by rising yields and softer demand amid broader risk‑off conditions. Short‑term Treasury bills remained a relative safe harbor, gaining 0.30%.

Real Assets

Real assets were the clear beneficiaries of the geopolitical shock. Commodities surged in March as energy markets reacted to the Iran conflict. The Bloomberg Commodity Index rose 11.50%, driven almost entirely by energy. The energy sub‑index jumped 40.75%, with WTI crude oil up more than 52%, reflecting fears of supply disruptions and transportation risks in the Middle East.

Precious metals pulled back during the month, with gold down 10.85%, retracing some of its prior gains amid volatility and profit‑taking. Industrial metals were largely flat to modestly lower, while agricultural commodities were mixed.

Macroeconomics & Policy

Economic data released during March took a back seat to geopolitical developments, as markets focused primarily on the implications of the Iran conflict for inflation, growth, and monetary policy. While underlying inflation trends had been moderating entering the month, the sharp rise in energy prices complicated the near‑term outlook and increased uncertainty around the path forward for central banks.

Policymakers emphasized flexibility and data dependence as geopolitical risks mounted, acknowledging that sustained disruptions to energy markets could materially impact both inflation expectations and economic activity.

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March 2026 Market Review is intended solely to report on various investment views held by Fidelity Deposit & Discount Bank and is distributed for informational and educational purposes only and is not intended to constitute legal, tax, accounting, or investment advice. Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. Fidelity Deposit & Discount Bank does not have any obligation to provide revised opinions in the event of changed circumstances. All data is provided by Bloomberg Finance, LP and Morningstar Direct. We believe the information provided here is reliable but should not be assumed to be accurate or complete. Data, if not otherwise noted, is as of 3/31/2026. References to specific securities, asset classes and financial markets are for illustrative purposes only and do not constitute a solicitation, offer or recommendation to purchase or sell a security. Past performance is no guarantee of future results. All investment strategies and investments involve risk of loss and nothing within this report should be construed as a guarantee of any specific outcome or profit. Investors should make their own investment decisions based on their specific investment objectives and financial circumstances and are encouraged to seek professional advice before making any decisions. Index performance does not reflect the deduction of any fees and expenses, and if deducted, performance would be reduced. Indexes are unmanaged and investors are not able to invest directly into any index.