Gas prices are displayed amid the U.S.-Israeli conflict with Iran, in Washington, D.C., U.S., March 9, 2026. REUTERS/Anna Rose Layden
Index Performance
U.S. broad-based indices finished the period in a sea of red for the second consecutive week. The Russell 2000 Total Return Index declined 4.03%. The Nasdaq ticked down 1.22%, and the S&P 500 Total Return Index also moved lower, ending the period down 1.99%.
Broad-based fixed incomes indices also ended the period, painted in red. The FTSE U.S. Broad Investment Grade Bond Total Return Index dipped 0.98%, while the FTSE Municipal Tax-Exempt Investment Grade Bond Index fell 0.63%. The FTSE High Yield Total Return Index tumbled 0.40%.
Macro Viewpoint
Investors entered 2026 hoping growth concerns would stay in the rearview mirror, but the macro backdrop is beginning to tell a more cautious story. Optimism was in the air as it seemed inflation and the unemployment rate were finally moving lower. December and January nonfarm payrolls further supported that view, with January’s report coming ahead of several Street estimates, but that optimism has quickly faded.
February nonfarm payroll growth slowed by 92,000, and the unemployment rate edged up to 4.4% from 4.3% in January. The unemployment rate has remained within a relatively tight 4.1% to 4.5% range since June 2024. Still, the latest revisions made the picture less encouraging. December payrolls were revised down by 65,000, pushing the final figure into negative territory (at -17,000). January payrolls were also revised lower, though the final reading of 126,000 remained above expectations.
The data released so far in 2026 points to a weaker-than-expected economy. Real GDP increased 1.4% in the fourth quarter of 2025, inflation remains above the Fed’s 2% target, job reports have softened, and the markets have struggled to gain meaningful traction. This combination suggests that the economy is losing steam at a time when investors had expected a firmer start to the year.
To add fuel to the fire, the United States and Isreal have engaged in military operations involving Iran, raising geopolitical tensions in the Middle East. Oil prices have surged 27.8% amid the conflict, with further increases anticipated as trade disruptions emerge in the Strait of Hormuz. Given this combination of factors, it has become harder to maintain the optimism that was prevalent at the end of last year.
Markets have started to reflect the change. The U.S. dollar rose 1.4%, while gold ticked higher before stabilizing. The message from the markets is not one of panic, but it is one of growing concern. The optimism that carried markets into 2025 has not fully disappeared, but it is now being tested by a difficult mix of sticky inflation, geopolitical risk, and softer growth.
On the Yield Front
Yields dipped following the weaker than expected job report. The two-year Treasury yield declined 4 basis points (bps), the five-year inched down 2 bps, and the 10-year remained relatively unchanged with a marginal decline of 1 bp. On the other hand, the 30-year yield remained relatively flat.
Fund Flows by Asset Type
Money Market Funds are back in the lead, recording their second consecutive week of inflows above $20bn. This week, the asset class gathers a strong $22.5 bn. In the wake of uncertainty, investors appear to be gravitating toward safety as they position for the unknown. With global tension continuing to rise, further allocations into safe-have assets would not be surprising.
Within Fixed Income, U.S. Taxable Bond Funds extended their streak of positive net flows to nine consecutive weeks, bringing in $7.8bn. The largest contributions came from U.S. Alternative Bond Funds, which attracted $2.23bn, followed by U.S. Short/Intermediate Investment Grade Bond Funds with $1.7bn, and U.S. World Income Funds with $1.25bn. Municipal Bond Funds streak increases to 15 weeks, as the asset class received $1.4bn in net flows.
Within Equities, however, the five-week winning streak has come to an end, as the asset class posted net outflows of $19.4bn. The leading catalyst behind the steep decline was U.S. Large-Cap Funds, which saw outflows of $18.3bn. On the other side of the pond, U.S. Developed International Market Funds brought in $891.3m, while U.S. Emerging Market Equity Funds added $1.3bn—both extended their positive inflow streak to 10 weeks. The message is clear: while some investors are positioning into safety, others are diversifying abroad in search of alpha.
U.S. Commodity Funds posted outflows of $2.8bn, and U.S. Alternative Investments posted inflows of $481m. The tables have turned for U.S. Mixed-Assets Funds, which broker their outflow streak and have positive inflows of $471m.
