The United States initiated Operation Epic Fury against the Islamic Republic of Iran on Saturday, 28 February 2026. The S&P 500 (Index: SPX) had closed its trading week the day before, ending at a value of 6,878.88. Through the close of trading on 30 March 2026 the index has dropped 535.16 points, or about 7.8% of its pre-geopolitical event level.

As major events go in the U.S. stock market, at this point in time, the impact of the Iran war is a little smaller in magnitude than 2025's DeepSeek AI shock that sent the S&P 500 crashing between 19 February 2025 and 13 March 2025. The following chart shows both events, with the S&P 500 mapped against its underlying trailing year dividends per share.

The main difference between the two events is the apparent steepness of their declines. As shown in the chart, the DeepSeek AI shock appears to have involved a more severe dropoff, falling a similar amount in a shorter period of time, but we won't know for sure if that's the case until after SPGlobal finalizes the S&P 500's dividend data for 2026-Q1 after the close of trading on 31 March 2026. In the chart, the trailing year dividend data is based on a combination of historic outcomes and quarterly dividend futures that don't precisely match up with the S&P 500's calendar quarters.

In any case, the Iran war event looks set to become larger in magnitude than the DeepSeek AI shock. Will the S&P 500 continue declining so much that it overtakes the combination one-two punch of 2025's DeepSeek AI shock and the "Liberation Day" global tariff event? Or will it recover before it might drop that much?

The S&P 500 (Index: SPX) has dropped for four consecutive weeks, coinciding with the market-moving geopolitical event of the Iran war that began on 28 February 2026. In the fourth week since the Iran war began, the index dropped 2.1% to close out the week at 6,368.85.

Through these four weeks, the S&P 500 has been the strongest of the three major U.S. stock market indices in losing 7.4% of its value since the close of trading on 27 February 2026. The S&P 500 is the only one that hasn't yet confirmed a correction, defined as a 10% decline from its last peak. The index last peaked at 6,978.59 on 27 January 2026 and is now a little over 8.7% below it.

The market moving headlines during the fourth week of March 2026 highlighted the problems Federal Reserve officials are having in reading the state of the U.S. economy to determine the path they will take in setting U.S. interest rates. For its part, the CME Group's FedWatch Tool cut through the Fed's foggy analytical clutter to anticipate no interest rate changes through the end of 2026. Instead, the tool indicates a low probability of rate hikes, giving about a 3 out of 10 chance of a quarter point rate hike in the Federal Funds Rate being announced after the Fed's Open Market Committee meets on 28 October (2026-Q4).

The latest update of the alternative futures chart whose the S&P 500 continued a downward trajectory below the redzone forecast range we added to the chart at the end of February 2026. The centerline of that forecast range is effectively functioning as a counterfactual, indicating where the trajectory the S&P 500 would have taken in the absence of the ongoing geopolitical event.

Through the close of trading on 27 March 2026, the S&P 500 is about 7.3% below that level.

Here are the week's market moving headlines:

Monday, 23 March 2026

• Signs and portents for the U.S. economy:
• Oil falls over 13% on Trump postponing military strikes on Iran energy infrastructure
• US construction spending unexpectedly falls in January
• Fed minions fear inflation, worry about jobs as they debate direction for U.S. interest rates:
• Fed's Goolsbee: Inflation now the greater risk, watching expectations closely - CNBC
• Fed's Miran still believes Fed should cut interest rates - Bloomberg TV
• Fed's Daly: no single most-likely path for rates
• Bigger trouble, stimulus developing in China:
• China limits fuel price hike to cushion impact of rising oil prices
• China's Sinopec will not buy Iranian oil, wants to tap state reserves
• BOJ minions not getting the inflation they want, but still want to hike rates:
• Japan's core inflation slows below BOJ target, complicates rate communication
• BOJ's narrative shift signals dogged commitment to rate hikes
• Bigger trouble developing in Eurozone, ECB minions claim they'll snap into action if they think they need to fight inflation:
• Iran war deals new blow to Europe's industrial heartland
• ECB won't hesitate to act if inflation at risk of getting entrenched, Kazimir says
• ECB must act in case of second-round inflation impacts, VP tells El Mundo
• Stock market ends higher as Trump says deal with Iran could be soon
• Wall Street indexes rally after Trump postpones strikes on Iran's power plants

Tuesday, 24 March 2026

• Signs and portents for the U.S. economy:
• Oil rises, with Brent climbing back above $100 as optimism fades over Iran war de-escalation
• Commentary: Why $100 oil won't break the American Consumer
• US fourth-quarter productivity growth revised down, but trend remains solid
• Bigger trouble, stimulus developing in China:
• Feed cost surge from Iran war deepens pain for China's pig farmers
• China banks eye profit boost as nearly $8 trillion in deposits to be repriced
• BOJ minions not sweating small contributors to inflation:
• BOJ chief expects limited impact on inflation from proposed food tax freeze
• Bigger trouble developing in Eurozone:
• Euro zone economy close to stalling as war takes its toll
• Wall Street ended lower as Iran tensions weighed on market sentiment
• Wall Street indexes fall on worries about Middle East war, interest rates

Wednesday, 25 March 2026

• Signs and portents for the U.S. economy:
• Oil falls as reports of 15-point proposal spurs ceasefire hopes
• US import prices post largest gain in nearly four years in February
• Trump's tariffs had little impact on GDP in 2025, but raised revenue, academic paper finds
• Fed minions thinking they've set interest rates just right for now, report they're losing less money:
• Fed's Barr sees rates holding steady 'for some time' given above-target inflation
• US Fed's loss narrows sharply to $19.6 billion in 2025
• Bigger trouble, stimulus developing in China:
• AI boom accelerates China's chip industry growth as demand strains supply chain
• Chinese food delivery giants surge as regulator, state media call end to price war
• U.S. equities closed higher on talks of a possible U.S.-Iran peace plan
• Wall Street advances as investors bet on Mideast de-escalation

Thursday, 26 March 2026

• Signs and portents for the U.S. economy:
• Oil prices rise 5% as investors fear further Middle East escalation
• Iran war chokes petrochemical supply, sends plastic prices soaring
• US inflation will surge to 4.2% on energy shock, warns OECD
• Low US weekly unemployment claims indicate labor market stable
• US fixed 30-year mortgage rate jumps to six-month high as Iran war drags on
• US population growth falters as immigration falls
• Fed minions thinking about maybe cutting rates later in 2026, but are less likely to do so:
• Fed still set to cut US rates late this year, say economists, rejecting market pricing: Reuters poll
• Fed's Miran Says He Raised Rate Projection Due to Inflation Data
• Bigger trouble, stimulus developing in China:
• From beer to cosmetics, Asia feels full force of energy crisis
• Exclusive: China considers easing bank shareholding limits to boost capital
• BOJ minions excited to see higher inflation developing in Japan:
• https://www.reuters.com/world/asia-pacific/japans-corporate-service-inflation-perks-up-february-2026-03-26/
• ECB minions standing by to maybe change their perfect monetary policy:
• ECB ready to hike rates even if expected inflation surge is short-lived, Lagarde says
• ECB Would Need ‘Forceful’ Response if Inflation Surges, Says Lagarde
• Nasdaq dropped more than 2% as investors react to rising Middle East tensions
• Wall Street slides as Mideast de-escalation uncertainty weighs on sentiment
• Nasdaq confirms correction, Wall Street slumps on Middle East uncertainty

Friday, 27 March 2026

• Signs and portents for the U.S. economy:
• U.S. Oil Prices Surge Back Above $100 a Barrel
• Oil, gas exploration is back: Energy giants hunt to replenish reserves
• Fed minions worried about inflation arising from Iran war, even though their crystal ball is foggy:
• Fed's Jefferson: sustained higher energy prices could worsen inflation, spending outlook
• Fed's Paulson worried about war's impact on inflation expectations
• Fed's Barkin says 'fog' again obscuring economic outlook
• Fed's Cook says the balance of risks has shifted toward inflation due to Iran war
• Bigger trouble, stimulus developing in China:
• Chinese ships halt attempt to exit Hormuz despite Iran safe passage assurances
• China's largest banks' profits virtually flat as property slump continues
• China's industrial profits jump as Middle East war casts long shadow
• BOJ's former chief minion still excited about more interest rate hikes in Japan:
• Bank of Japan may raise rates by June as Iran war fuels inflation, its ex-top economist says
• Ex-BOJ chief Kuroda sees 3-4 more rate hikes to 1.5% in 2027, Asahi interview shows
• BOJ likely to warn of inflation whiplash from Iran war, ex-central bank executive says
• BOJ releases new natural rate estimate as part of communication drive
• ECB minions stay they're ready to keep standing by as long as they can before raising Eurozone interest rates:
• ECB should not be in a rush to raise rates, Schnabel says
• ECB should not rush to hike rates as baseline still holds, Patsalides says
• Dow tumbles almost 800 points and enters correction, S&P 500 posts fifth straight losing week
• Nasdaq plunged over 2% as Middle East tensions rattled Wall Street
• Stocks tumble, Dow confirms correction territory, as Middle East tensions drag

The Atlanta Fed's GDPNow tool forecast of real GDP growth in 2026-Q1 fell to +2.0%, declining from the +2.3% growth anticipated a week earlier.

The upcoming trading week will be short with the Good Friday market holiday on tap.

Image credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a Federal Reserve official who is trying to see the future for inflation in a crystal ball that has fogged up".

The 2026 Consumer Electronics Show in Las Vegas came and went at the beginning of the year. At the show, advanced electronics, communications, and computing devices tend to hold sway, but the 2026 show featured a new kitchen product that delivered something more: a range hood for venting smoke and fumes from stove tops.

At their most basic level, range hoods take on the role of a chimney for keeping the byproducts that come from cooking with heat or fire from filling the kitchen and all the other rooms of a home. Since the advent of modern electric and gas stoves, they typically include a fan to pull air up from the range top to a vent that directs the pulled air out of the home altogether. At the 2026 CES chow however, Arspura took the concept to a whole new level, replacing the basic fan of typical range hoods with industrial-grade airflow vortex technology to produce a much more effective design. The following video from their CES display introduces their InclindedQuadVortex (IQV) range hood:

The next video provides more insight into how the IQV range hood system works:

The combination of the air curtain in the front and the side panels helps the vortex engine pull air directly from the range top. Since the vortex engine is more powerful in generating air flow than a typical fan motor used in a traditional range hood, it is able to vent out the smoke and gases out from cooking much more quickly and effectively.

At present, Arspura's IQV is available as a kitchen upgrade product, whose main limit today is the need to install larger diameter ducting to accommodate its airflow. If it becomes popular enough however, that obstacle would be overcome as homebuilders choose to adopt it as a basic feature high-end kitchens, at first, and then in most kitchens in new homes.

HT: Core77.

Admittedly, we've only been following the ten worst performing component stocks of the S&P 500 (Index: INX) in 2025 for the last four months, but we're starting to think that many, if not most, of these stocks would not have made very good investments during that time.

If you're just joining this series, the Thanksgiving Leftover Stocks are a group of ten stocks that Seeking Alpha's Jason Capul identified as "Thanksgiving leftovers no one wants". Four month later, that's mostly true, but with one notable exception.

That exception is Dow Inc. (NYSE: DOW). Back on 28 November 2025, the chemical industry giant was trading at $23.85 per share. Four months later, through the close of trading on 25 March 2026, the company's share price has risen to $39.63. Or rather, its value has increased to be 166% of what it was on the day after Thanksgiving 2025, as the company's outlook has brightened in response to the geopolitical turmoil disrupts the supply chains of its foreign competition.

The following spaghetti chart presents the performance of each of the ten Thanksgiving Leftover Stocks with respect to the S&P 500, each indexed with respect to their closing values on 28 November 2025.

Aside from Dow, the only other company whose stock has registered a sustained increase is Deckers Outdoor (NYSE: DECK). The footwear designer behind popular sneaker and boot brands like Hoka, Teva, and UGG has seen its stock grow to $100 per share at the close of trading on 25 March 2026, 122% of its post-Thanksgiving Day 2025 level.

The remaining eight Thanksgiving Leftover stocks are doing less well than the S&P 500, which itself is just 96.2% of its day-after-Thanksgiving-Day value. Five of these eight firms are bunched within ten percent of the S&P 500's level, but the remaining three are doing much, much worse. Here's a quick summary of their share prices on 25 March 2026:

• Factset Research Systems (NYSE: FDS) - Share Price: $193.78 (69.9% of 28 November 2025 value)
• Gartner (NYSE: IT) - Share Price: $150.23 (64.5% of 28 November 2025 value)
• Trade Desk (NASDAQ: TTD) - Share Price: $21.97 (55.5% of 28 November 2025 value)

We covered The Trade Desk's decline in the previous edition, but observe the ad-tech firm's ongoing implosion has recently gotten worse as an audit firm advised its clients to avoid it. Through this point of 2026, The Trade Desk is the worst performing component stock of the entire S&P 500 index.

The other two poor performers, Gartner and FactSet, aren't far behind. Gartner, an IT research firm and consulting house whose business model is directly in the crosshairs of AI technology, which promises to do much of the same things that Gartner does at much lower costs. Financial data provider FactSet faces a very similar existential challenge from AI technologies, which the trend for its stock price is capturing.

As for how 2025's Thanksgiving Leftover Stocks are doing as a group, we find they are underperforming the S&P 500. If we treat them like an equal-weighted index, they're doing horribly, but if we weight them by their market capitalization, like the S&P 500 itself, they're still doing worse, but not anywhere near as badly. The following chart visualizes how they've done during the last four months:

Perhaps all this will change in the next month when we next update how 2025's Thanksgiving Leftover stocks are doing in 2026. Or not. If you were going to place a bet on the outcome, would you take the over or the under?

Once upon a time, and in truth, as recently as four years ago, there was a strong relationship between the spot price of gold and the inflation-indexed market yield of 10-Year Constant Maturity U.S. Treasuries.

It was an inverse relationship. When the inflation-adjusted interest rate on the 10-year bonds fell, signaling an increase in inflation, the price of gold would rise. And vice-versa. If the inflation-adjusted yields of these treasuries rose, indicating falling inflation, the price of gold would fall as well.

That made a sort of sense. But that relationship has broken down in the last four years. Starting from 17 March 2022, when the Federal Reserve finally acted to hike interest rates to combat the high inflation unleashed by the Biden administration a year earlier, the relationship between the inflation-indexed 10-year Treasury and gold spot prices has steadily broken down.

We can see that in the following chart, in which the price of gold has fully decouples from the interest rate of the inflation-protected 10-year Treasury.

Most of this decoupling has taken place since 27 December 2023. At that time, the yield of the inflation-indexed 10-year Treasury was 1.64% and the price of an ounce of gold was $2,079. Since that date, the 10-year inflation-protected Treasury has ranged between that low and a high of 2.28% on 30 April 2024. Today, that yield is just below the middle of that range at 1.88%.

But the price of gold has soared during this time. In recent months, as the 10-year TIPS yield has ranged between, it soared to reach a high of $5,414.49 an ounce on 28 January 2026. In the weeks since, it has plummeted, losing over 10% of its peak value. All without any big change in the inflation-protected treasury yield.

It's like the carnival game "high striker". Gold prices are rising and falling by huge amounts independently of changes in yields and inflation.

In mathematics, the slope of a vertical line is described as "undefined". Which is to say there is no relationship between it and whatever the horizontal axis represents. In the case of gold prices, inflation, and the yield of 10-year U.S. Treasuries, we can say that in March 2026, no such relationship exists between these three things, nor has there been such a relationship in years.

Perhaps there never was. Or perhaps we're missing a bigger factor that's holding greater sway today. If we are, what do you suppose it is and why has it been able to cause the price of gold to change so much in during the last four years as compared to how it changed during the preceding 15 years?

Image Credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a Wall Street bull and bear who are taking turns playing the high striker carnival game that is labeled 'GOLD PRICES' and the bear asks 'DIDN'T THIS GAME USE TO HAVE SOMETHING TO DO WITH INFLATION?".

Political Calculations' initial estimate of the total value of new home sales in the United States during January 2026 as measured by a time-shifted, partial twelve month trailing average is $27.37 billion, which is down substantially from December 2025's initial estimate of $30.36 billion.

The raw numbers for January 2026 are even worse. The U.S. Census Bureau's first estimate of the state of January 2026's new home market counted 48,000 non-seasonally adjusted sales at an average price of $499,500, which when multiplied together, rounds up to a total valuation of $23.98 billion.

The reason why isn't much of a surprise since January 2026 featured the largest and most severe winter storms in years. The northeast and midwest regions of the U.S. were very hard hit by the weather, which crashed new home sales in them. Here's how the National Association of Home Builders described the winter storms' impact on new home sales:

Sales of newly built single-family homes fell 17.6% in January, to a seasonally adjusted annual rate of 587,000 from a downwardly revised December reading, according to newly released data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The pace of new home sales is down 11.3% from a year earlier....

“New home sales fell in January largely because of weather-related disruptions, even as mortgage rates eased modestly,” said Jing Fu, NAHB senior director of forecasting and analysis.

Political Calculations' estimates are designed to capture the underlying trend in the new home sales. The initial estimate for any given month is based on the U.S. Census Bureau's estimated number of new home sales multiplied by their average price for that month, which is averaged with the data for the preceding six months. These total valuation (or new home market capitalization) estimates are then updated as each new month's data is added to it, until it covers a full twelve months worth of data and as older data is revised, which continues until that data is finalized some 10 months after the month for which the data applies.

The benefit of this approach is that it 'centers' the trailing average in something closer to real time, which makes it easier to identify when changes in trend take place. The disadvantage is that the most recent data is incomplete and will be subject to revision during the next nine months as new estimates are incorporated and older estimates are revised.

The following charts present the U.S. new home market capitalization, the number of new home sales, and their average sale prices as measured by their time-shifted, trailing twelve month averages from January 1976 through January 2026.

Flat-to-rising trend for new home sales:

Average new home prices trending higher:

The lack of new home sales is helping contribute to an increase in the supply of new homes. New homebuilders are responding to the situation by offering bigger incentives to new home buyers and lowering prices:

... the inventory of homes for sale rose to a 9.7-month supply, up from eight months in December, according to the U.S. Census. That is 7.8% higher than January 2025.

More supply and less demand led builders to drop prices. The median price of a home sold in January was $400,500, the agency said, a decline of 6.8% year over year. Prices for existing homes are still flat nationally, but builders report increasing incentives to get buyers in the door.

Data from March does not appear to be any better. An estimated 37% of builders cut prices in March, an increase from February’s 36%, according to the National Association of Home Builders.

This continuing weakness suggests the environment is shifting to become more of a buyer's market for new homes in the first quarter of 2026. We'll see how that progresses in the months ahead.

References

U.S. Census Bureau. New Residential Sales Historical Data. Houses Sold. [Excel Spreadsheet]. Accessed 19 March 2026. 

U.S. Census Bureau. New Residential Sales Historical Data. Median and Average Sale Price of Houses Sold. [Excel Spreadsheet]. Accessed 19 March 2026. 

Image credit: House under construction photo by Ernie Journeys on Unsplash.

The S&P 500 (Index: SPX) dropped 1.9%, or 125.73 points, below its previous week's close to end the third trading week of March 2026 at 6,506.46. The index is nearly 6.8% below its 28 January 2026 record high close of 6,978.59.

The escalation of oil and gas prices resulting from the Islamic Republic of Iran's efforts to shutter oil container ship traffic through the Strait of Hormuz continued to set the big economic stories of the week. Oil prices rose during the week, reaching over $150 per barrel in the eastern Asian nations that receive the bulk of their oil supplies by sea from Persian Gulf nations.

Oil prices elsewhere have risen, but not by as much. In the U.S., West Texas Intermediate oil spot prices ended the week below $100 per barrel, or around $30 per barrel higher than in February 2026. This surge is expected to add inflationary pressures to the U.S. economy, which led to the biggest market-moving headline of the week that was. Rate cuts by the Federal Reserve are no longer on the table for 2026.

The CME Group's FedWatch Tool no longer projects any interest rate cuts through the end of 2026, which it now gives a 0% probability of occurring. Instead, the tool indicates a low probability of rate hikes, giving a 32% probability of a quarter point rate hike in the Federal Funds Rate being announced after the Fed's Open Market Committee meets on 28 October (2026-Q4).

Investors responded by sending stock prices lower, especially after the Fed acted to hold rates steady at the end of its two-day meeting on Wednesday, 18 March 2026. The latest update of the alternative futures chart puts the trajectory of the S&P 500 below the redzone forecast range we added several weeks ago, which is now pulling double-duty as a working counterfactual for indicating where the S&P 500 would be if not for the geopolitical event of the Iran war.

Using the mid-point of the redzone forecast range as a counterfactual reference, we find the S&P 500 ended the week of trading on 20 March 2026 about six percent below where it would have been in the absence of the event.

Here are the week's market-moving headlines, which prominently features the volatility of oil prices and the change in investor expectations for Federal Reserve rate cuts in 2026:

Monday, 16 March 2026

• Signs and portents for the U.S. economy:
• Falling oil prices send Wall Street toward its best day since the start of the Iran war
• Middle East oil exports drop at least 60% as Hormuz stays mostly closed, data shows
• US, China seek to wrap Paris talks on managed trade, agriculture deals for Xi-Trump summit
• Exclusive: US, China discuss farm goods, managed trade in 'remarkably stable' Paris talks-sources
• US manufacturing output increases; homebuilder sentiment ticks up
• Fed minions trying to cope with foggy crystal ball:
• Fed to present an updated outlook looking through the fog of war
• Bigger trouble still lurking in China:
• China's new home prices extend drop in February as recovery remains elusive
• BOJ minions waver on plan for interest rate hikes:
• BOJ to stand pat as Iran war muddles outlook, sustain rate-hike bias
• ECB minions excited to participate in meeting of central bankers to address surge in oil prices:
• Oil shock sparks rate repricing in historic 'G4' central bank week
• BIS urges central banks not to rush reactions to energy price spike
• Wall Street recovers, ends green as Brent stays at $100/bbl and the Middle East war continues in focus
• Wall Street ends higher as traders return to AI stocks

Tuesday, 17 March 2026

• Signs and portents for the U.S. economy:
• Oil prices jump more than 2% after renewed Iranian attacks on UAE
• US pending home sales rebound on lower mortgage rates before Iran war
• Fed minions starting to realize how badly they let Bidenflation get out of control, expected to keep rates steady:
• US 'transitory' inflation turns five and is still a big brat
• Bigger trouble, stimulus developing in China:
• China's fuel export ban to further tighten Asia supply
• China oil majors resume seeking Russian oil after a 4-month halt, sources say
• China boosted crude stockpiles at start of 2026, but is not using them
• Chief BOJ minion obsessed with trying to generate wage-price inflation cycle in Japan:
• Bank of Japan chief stresses need to hit 2% inflation backed by wage gains
• Badly informed Eurozone politics infects ECB minions' succession:
• How to boost EU competitiveness? Choose a German ECB chief
• U.S. stocks extend gains as investors expect no change to interest rates
• Wall Street ends up as traders turn to Fed

Wednesday, 18 March 2026

• Signs and portents for the U.S. economy:
• Oil extends gains to rise 5.6% after Iran attacks Gulf energy facilities
• US oil exports seen rising as WTI discount to Brent hits widest in 11 years
• US poised to waive summer gasoline regulations to ease prices, sources say
• US producer inflation runs hotter in February, expected to accelerate further amid Iran war
• Before: Fed minions expected to hold rates steady, then do as they were expected:
• Fed likely to hold rates steady as Iran war shocks policy debate
• Fed to signal rate hike an option? Possible, though unlikely
• After: Fed does the expected, chief Fed minion says he won't be forced out despite blowing out budget for Fed building renovation:
• Fed leaves interest rates unchanged, expects inflation to climb
• Fed's Powell confirms Trump is stuck with him until DOJ probe is 'well and truly' over
• Powell says tariffs keeping inflation elevated, Fed watching energy prices closely
• In a shift, one Fed policymaker sees a rate hike ahead
• Powell says 'stagflation' is a 1970s term, not what we face today
• Another oil price jump further pushes out Fed rate-cut odds
• ECB minions say it's no time to ease bank rules:
• ECB sees underpriced geopolitical risks, warns against easing bank rules
• Wall Street snaps winning streak as Fed keeps rates unchanged, inflation fears loom
• Wall Street ends sharply lower after Fed keeps rates unchanged

Thursday, 19 March 2026

• Signs and portents for the U.S. economy:
• Brent up but off highs, US crude finishes with small loss
• Natural gas prices soar as doomsday scenario unfolds; Iran, Israel strike infrastructure
• US pump prices jump 30% since Middle East war began, headed toward $4 a gallon
• Wall Street bank capital to fall 4.8% under new rules, in win for industry
• US new home sales drop to near 3-1/2-year low in January
• US fixed 30-year mortgage rate hits three-month high amid Iran war
• Bigger trouble, lesser stimulus developing in China:
• China's robust iron ore imports are going into storage, not steel
• China set to keep rates steady as Mideast war clouds inflation outlook
• BOJ minions' plans to hike Japan's interest rates thwarted by Iran war:
• BOJ keeps rates on hold, warns of inflationary pressure from Iran war
• BOJ Governor Ueda's comments at news conference
• ECB minions hold Eurozone interest rates steady, staring to think their perfect monetary policy might need rate hike to fight oil price inflation:
• ECB keeps rates unchanged but signals readiness to act on energy
• Lagarde comments at ECB press conference
• ECB expects rate hike talks in April with move more likely in June, sources say
• Wall Street ends in the red for a second day as inflation fears take center stage
• Wall Street ends down as traders see no rate cuts before 2027

Friday, 20 March 2026

• Signs and portents for the U.S. economy:
• Oil falls as US, allies discuss efforts to boost supply and open Strait of Hormuz
• Fed minions trying to learn from worst bank failure in years, having trouble reading monetary needs of U.S. economy:
• Fed's Bowman says new external review of Silicon Valley Bank failure underway
• Bigger trouble developing in China:
• China's record oil output reaches limits of what's possible
• Other central banks starting to think about rate hikes:
• ECB, BoE could hike as soon as April on inflation pressures, brokerages say
• ECB governors signal vigilance over inflation as banks bet on rate hikes
• Bank of England to raise interest rates in April, July on inflation risks, J.P. Morgan says
• ECB minions say they will keep their perfect monetary policy for Eurozone and won't change it unless they must:
• ECB will not be inactive or overreact, ready to act to stabilise inflation, Villeroy says
• U.S. stocks end lower for a fourth consecutive week as Iran war concerns loom over sentiment
• Wall St slips as Middle East turmoil clouds Fed outlook
• U.S. stocks' decline persists despite efforts to minimize concerns about the Iran war, oil prices sustain

The Atlanta Fed's GDPNow tool forecast of real GDP growth in 2026-Q1 fell to +2.3%, rebounding from the +2.7% growth anticipated a week earlier.

Image credit: Microsoft Copilot Designer. Prompt: "An editorial cartoon of a Federal Reserve official pointing to a news ticker that says 'IRAN WAR: OIL PRICES SURGE' as other officials take a box marked '2026 RATE CUTS' away from a suit wearing Wall Street bull and bear who are upset".

The ranks of lower and middle class households in the United States is thinning. The reason why is remarkable: more households are earning higher incomes, allowing them to move up into the top ranks of the nation's income spectrum.

You don't have to take our word for it. We've organized the U.S. Census Bureau's inflation adjusted data for household income from 1967 through 2024 into three groups. The first group contains households with annual total money income of $49,999 or less, which represents lower income-earning households. The second group contains households earning between $50,000 and $149,999 to represent middle income-earning households. The third group contains all households earning $150,000 or more.

The following chart confirms the percentage share of lower and middle-class households in the U.S. is shrinking as the percentage of upper-class households increases.

U.S. households earning $150,000 or more in inflation-adjusted constant 2024 U.S. dollars have risen from 4.6% of all households to 26.1% from 1967 through 2024. Middle-ranked households earning between $50,000 and $149,999 has fallen from 52.4% to 43.8% of all U.S. households. The lowest-ranked households earning real incomes of $49,999 or less has plunged from accounting for 43.0% of all U.S. households to just 30.2%.

A similar pattern holds for U.S. families. See more commentary on this phenomenon here and here.

Reference

U.S. Census Bureau. Historical Income Tables: Households. Table H-17. Households by Total Money Income, Race, and Hispanic Origin of Householder. [Excel spreadsheet]. 25 August 2025.

When we reviewed the carnage among Business Development Companies, or BDCs, when recapping February 2026's dividend decreases, its concentration within this sub-sector of the financial services sector of the U.S. economy really stood out.

BDCs make their money by loaning money they either raise from investors or borrow themselves to small- and medium-sized enterprises that can't raise money by going public and selling stock and also financially distressed businesses. The business models of most established BDCs involve borrowing money, then loaning it back out at higher interest rates, where they pocket the difference.

That makes the profit margins of BDCs vulnerable to rate cuts. Because their loans are tied to the Federal Funds Rate, when the Fed cuts that rate, it negatively impacts BDC profits. In the last three years, BDCs have gone from a rising or high interest rate environment (March 2023 through August 2025), to a falling rate environment (September 2024 through December 2025).

The performance of the VanEck BDC Income Exchange Traded Fund (ETF: BIZD), which includes over 30 BDCs in its market-cap weighted index, gives a good sense of how BDCs performed in these different environments. The following chart shows BDCs rising or flat in the rising rate environment, but then either stalling or falling as the Fed shifted gears into its rate cutting mode.

But that's not the whole story. During the rate cutting period, which initiated the pressure on BDC profits, BDCs have had to cope with the DeepSeek AI shock, peaking just ahead of that event on 19 February 2025. Then they faced the Liberation Day global tariffs shock event of 2 April 2025, plunging with the rest of the market, before going on to recover. That lasted until August 2025, when the return of rate cuts initiated a new downtrend that was followed in January 2026 with a new AI shock event that undermined the business prospects of the Software-As-A-Service (SaaS) firms. Many of which were getting their funding to grow from BDCs.

With AI technologies seemingly set to destroy any potential profitability these firms had, many BDCs were suddenly faced with having to write down large portions of their portfolios. But, not all BDCs are in that boat.

When we looked at the stock performance of individual BDCs, we found a clear characteristic that divided them. That characteristic is their governance and what quickly became evident was that internally-managed BDCs were generally outperforming BDCs whose investments are managed by external parties.

To illustrate that difference, we randomly selected six externally-managed BDCs to compare their performance against an equal number of internally-managed BDCs over the last three years. Here is a list of the BDCs in our performance sample:

Let's get to the results. The following chart visualizes the relative performance of the stocks of the two kinds of BDCs:

We've shown the 3-year returns for the benchmarks of the S&P 500 (Index: SPX) at 72.01% and BIZD at -10.79% to show how they compare against the range of the two categories. The externally managed BDCs range from a high of +2.79% to a low of -29.22%, with four of the six BDCs having a negative return.

By contrast, the internally managed BDCs range from a high of +44.22% to a low of -16.96%, with two of the six BDCs having a negative return.

But it's not just recent market events driving that outcome. In the next two charts, we show how the sample of internally managed and externally managed BDCs compare with the performance of the S&P 500 over the last three years. The first chart tracks the internally managed BDCs:

The next chart follows the externally managed BDCs over the same period.

We find the internally-managed BDCs have sustained better performance than the externally-managed BDCs over all portions of this three year period, which can be seen in their relative performance being closer to that of the benchmark S&P 500 index. That better performance occurred both in a period in which rising interest rates provided BDCs with a tailwind and the current period in which falling interest rates are providing fierce headwinds against the BDCs.

When we started this exercise, we thought we'd mainly be discussing the role of how changing interest rates have affected the performance of the BDC sub-sector of the financial services industry, leading so many of these firms to cut their dividends in recent months. We didn't expect to run into a more interesting question: how much does management matter in a publicly traded company? In the case of BDCs, whether the people managing their lending business work directly for the firm or are employed outside of it would appear to have a significant impact affecting the returns of the shareholders who own the companies.

Image credit: Microsoft Copilot Designer. Prompt: "A cartoon illustrating a Business Development Company that is internally managed versus a BDC that is externally managed", the result of would appear to succinctly explain at least one reason why the outperformance of internally-managed BDCs over externally-managed ones exists!