Observations & Insights – March 2, 2026

No Clear Trend

U.S. stock indexes gave up much of the ground they had gained the previous week, extending a pattern of alternating gains and losses that’s characterized early 2026. The Dow finished down -1.3% for the week, the NASDAQ declined -0.9%, and the S&P 500 slipped -0.4%.  

 Key Points

• Geopolitical tensions may increase short-term volatility.
• The U.S. economy remains resilient.
• Artificial intelligence is shifting the economy toward higher productivity.

 Observations: Bonds Rally While Stocks Fade in February

January’s modestly positive momentum did not extend into February for the S&P 500 and the NASDAQ, as both indexes finished in negative territory, with the former down -0.9% and the latter -3.3% lower. In contrast, the Dow eked out a 0.2% gain, extending its string of positive months to 10 in a row. 

Prices of government bonds rose on Friday, sending yields lower, to cap a month of strong fixed-income performance. The yield of the 10-year Treasury fell to the lowest level in more than four months, finishing around 3.96% on Friday. At the end of January, the yield was 4.26%.

For the second week in a row, a higher-than-expected inflation indicator raised concerns about price pressures. Friday’s Producer Price Index (PPI) report on wholesale prices showed a 0.8% January increase compared to the previous month, more than double the rise that most economists had expected. A Personal Consumption Expenditures Price Index (PCE) report released the previous week also topped forecasts. 

Two months into 2026, U.S. equity sectors that trailed the broader market last year have moved up to the top of this year’s performance rankings. Through February, energy, materials, and consumer staples were the top three sectors on a year-to-date basis. Meanwhile, last year’s leaders, communication services and information technology, are lagging. 

The seven U.S. mega-cap stocks, the Magnificent Seven continued to drive a disproportionate share of the broader market’s earnings growth in the just-concluded earnings season. Those seven stocks generated average fourth-quarter earnings growth of 27.2% versus a 9.8% rate for the other 493 companies in the S&P 500, according to FactSet. Mag Seven earnings growth has now exceeded 25% in 10 of the past 11 quarters.  

After pausing in recent weeks, the year-to-date rally in gold prices resumed, and the precious metal climbed closer to the record high of more than $5,500 per ounce set in late January. Late Friday, gold futures were trading around $5,290. Silver prices also climbed during the week.

A monthly labor market report due out on Friday will show whether January’s stronger-than-expected jobs growth extended into February. In January, the gain of 130,000 jobs was more than double the number that most economists had forecast and up from 48,000 in December. Moreover, January’s unemployment rate slipped to 4.3% from 4.4% the previous month.  

Insights: The U.S. Strike on Iran

Markets were reminded this weekend that geopolitical risk remains an important, if unpredictable, driver of short-term volatility. The U.S. military strike against Iranian targets represents one of the most significant escalations in Middle East tensions in years and immediately shifted investor attention toward energy markets, inflation expectations, and global stability.

Historical analysis suggests that market reactions to geopolitical shocks tend to follow a familiar pattern: an initial risk-off response characterized by rising oil prices, strength in safe-haven assets such as U.S. Treasuries and gold, and short-term equity volatility. The primary economic transmission mechanism is energy. Any perceived threat to Middle East supply routes, particularly the Strait of Hormuz, through which a meaningful portion of global oil supply flows, introduces a risk premium into crude prices.

Source: Carson Investment Research

Higher oil prices matter because they function as a tax on global growth. Rising energy costs feed directly into transportation, manufacturing, and consumer prices, complicating the inflation outlook just as markets had begun to anticipate continued disinflation. Sustained energy price increases could delay expected Federal Reserve rate cuts by keeping headline inflation elevated even if underlying demand cools.

At the same time, history provides important perspective. Markets have generally proven resilient following geopolitical events when economic fundamentals remain intact. Equity drawdowns tied to military conflicts have often been temporary unless accompanied by recessionary conditions or prolonged supply disruptions. Today, the U.S. economy enters this period with positive growth, stable employment, and relatively strong corporate balance sheets, factors that tend to limit lasting market damage.

Sector effects are likely to be uneven rather than systemic. Energy and defense-related industries may benefit from rising risk premiums, while transportation and consumer-sensitive sectors could face pressure if oil prices remain elevated. For investors, the key variable is duration. Markets typically adapt quickly once escalation risks become clearer and supply disruptions are either confirmed or avoided.

Artificial Intelligence, Productivity, and the Changing Economic Cycle

While geopolitical developments dominate headlines, a quieter but potentially more consequential transformation continues to unfold at light-speed beneath the surface of the economy: the integration of artificial intelligence into corporate operations.

Recent workforce reductions across parts of the technology sector have been widely interpreted as signs of economic fragility. A more likely explanation is structural adaptation. Companies appear to be reorganizing around AI-enabled productivity, shifting from labor-intensive growth toward software-leveraged efficiency.

During much of the post-pandemic expansion, firms scaled primarily through hiring. Today, advances in AI allow companies to increase output without proportional increases in headcount. Analytical work, coding, customer service functions, and operational workflows are increasingly augmented by automation, effectively introducing a new form of digital labor into the economy.

This transition helps explain several apparent contradictions within current economic data. GDP growth has moderated, yet corporate earnings expectations remain stable. Hiring has slowed, but unemployment remains historically low. Wage pressures are easing without a sharp deterioration in household income. Productivity gains may be offsetting what traditionally would have translated into weaker profitability.

Technological revolutions rarely eliminate economic activity; instead, they reshape it. While AI may displace certain roles, goods and services must still be produced, distributed, and consumed. Historically, productivity improvements have expanded economic capacity by lowering costs and enabling entirely new industries.

The current surge in AI-related capital expenditures — data centers, computing infrastructure, and software investment — supports the view that the economy may be entering an early-stage productivity cycle rather than a speculative excess. Markets initially rewarded infrastructure providers and semiconductor companies. The next phase may broaden leadership toward firms successfully applying AI to improve margins and operational efficiency across industries.

Like previous technological revolutions, the adjustment period is unlikely to be smooth. Organizational restructuring, shifting labor demand, and evolving valuation frameworks can produce market volatility even as long-term growth potential improves.

Final Thoughts

The narrative in financial markets today is shaped by two powerful forces operating on different timelines. Geopolitical risk introduces short-term uncertainty through energy prices, inflation expectations, and investor sentiment, while artificial intelligence represents a longer-term structural shift capable of reshaping productivity, corporate profitability, and economic growth. The coexistence of these forces helps explain the range-bound and rotational character of markets so far this year.

Periods of transition rarely feel comfortable in real time. Yet history suggests that economies driven by innovation and supported by resilient institutions tend to adapt and expand over time. The United States remains uniquely positioned at the center of both technological leadership and global capital formation. While geopolitical developments may periodically increase volatility, and technological change may disrupt established patterns, the underlying drivers of long-term growth remain intact. For investors, maintaining diversification, discipline, and a long-term perspective remains the most reliable approach in an environment defined less by deterioration than by transformation.

It is our aim at Asbury Wealth Partners that you find the market commentary we provide informative and useful. As our success grows mainly through referrals from our clients, we encourage you to share this weekly newsletter with your friends, family, and colleagues. If you are a client, we thank you for your business and your confidence. If you are not yet a client, we encourage you to contact us today and explore how our team may be able to add value to your unique financial situation.

Thank You,

 The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on The NASDAQ Stock Market. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index.

 S&P 500 – A capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.

 The Dow Jones Industrial Average is comprised of 30 stocks that are major factors in their industries and widely held by individuals and institutional investors.

 The Russell 2000 Index is an unmanaged index generally representative of the 2,000 smallest companies in the Russell 3000 index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index.

 The CBOE Volatility Index? (VIX?) is meant to be forward looking, showing the market's expectation of 30-day volatility in either direction, and is considered by many to be a barometer of investor sentiment and market volatility, commonly referred to as “Investor Fear Gauge”.

 International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors.

 All indexes referenced are unmanaged. The volatility of indexes could be materially different from that of a client’s portfolio. Unmanaged index returns do not reflect fees, expenses, or sales charges. You cannot invest directly in an index. Consult your financial professional before making any investment decision.

 There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

 Asset allocation does not ensure a profit or protect against a loss.

 The Consumer Price Indexes (CPI) program produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services (Source: U.S. Department of Labor).

 The Gross Domestic Product (GDP) is a comprehensive measure of U.S. economic activity. GDP measures the value of the final goods and services produced in the United States (without double counting the intermediate goods and services used up to produce them). Changes in GDP are the most popular indicator of the nation's overall economic health.

 Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.

LPL Tracking #1072204