23 Mar 23rd March 2026

Markets Year to Date

Alright, so I am starting to get a little more worried here.

As you will have read recently, the only thing that concerns me about future returns is a Recession.

We will always get short periods of selling due to some headline or other. But stock prices always rebound sharply.

Take tariff day in April 2025. From Peak High to Trough low, the S&P500 fell around 17%. It recovered that entire loss in just 3 months and went on to post gains overall for the year.

Events like that are of no concern. You just ride them out because there is no long-term implications. Mind you, these events do require some sort of policy shift to change from Bear to Bull again. With tariffs it was Trump scaling back and earning the nickname, TACO.

I remember a similar fall in 2018 caused by the Fed worrying markets with aggressive rate rises. Stocks fell sharply but when the Fed changed course, stocks responded quickly and erased losses.

Recessions are a different beast

It took stocks about 5 years to recover their old highs when the GFC caused recession in 2008.

I don’t want to be waiting 5 years just to recover losses.

The point here being, is the war going to cause a Recession or not? I feel the odds are increasing.

I mentioned before that a double in the price of oil (would mean about $120) is a reliable leading indicator of future recession. We are not there yet, probably because of policy changes to stop it..

The IEA is releasing Oil from reserves. Extra supply sends prices down.

Now it sounds like the US is trying to let Iranian ships through and is relaxing restrictions on buying Iranian oil for the same reason. To increase supply.

What concerns me is long-term oil price changes. Because of the war, shipping companies cannot get insurance to go through the Strait. No one will risk a ship and its cargo without insurance so the shipping companies are choosing not to take that route.

Even if the US pulls back or even out of this war, there is no guarantee insurance companies will suddenly offer insurance again.

They will find other routes and pass on the added cost. Or maybe Iran will charge them for safe passage, which will get passed on to consumers.

It is possible we are looking at structurally higher oil from here.

The Fed have a better handle on this than the RBA. Powell said he does not care about short-term increases in Oil. Yes it will hit inflation, but he sees it as temporary and not a cause to raise rates.

The RBA is different. They increased rates citing current inflation and expectations of higher petrol prices.

Maybe I don’t understand as much as Bullock. But if Oil is causing inflation due to supply restraints……how does increasing interest rates bring inflation down? Surely if people have to spend 50% more on petrol they have less money to spend on coffees and restaurants. Spending less brings inflation down.

To me, the higher oil price is doing the same thing as interest rates.

Bullock needs to look at the different subsections of inflation and not just the headline.

Enough whining. Get back on course Matthew.

There seems to be some concern right now over Trump’s 48 hour deadline to Iran. I see no issue here. He says a lot of things, most of which don’t happen. I can’t see why this threat is any different. It is just short-term noise.

I was reading the weekly FactSet report and they put out an interesting chart this week. It is looking at buy ratings for stocks,. I won’t bore you with details, but basically, the percentage of Buy ratings is at an all time high.

The last high was February 2022. Which was close to the top and the market ended down 22% that year.

They posit that this indicator is contrarian. High numbers mean we are getting to a top.

Then you have the fact that stocks are only down 5% this year despite the war and its implications. That seems too positive to me. Stocks should be down more.

But what if we are near a bottom now?

Another tool I use for picking a bottom is the VIX. I have two levels. 27 and 35 that are my indications of a short-term bottom. We hit 27 a couple of weeks ago but have not hit 35 yet. That says stock prices can continue lower until we hit a 35 or higher. The good news is if we do get to 35 the following month and year returns are fantastic.

The hyper-scalers are spending huge amounts of Capex on AI which the market does not like and tells them by sending stock prices lower. Stock prices are telling the big guys not to spend as much on AI and at the same time AI is destroying a different Tech sector, the Software sector.

We are also starting to see AI related layoffs. Atlassian fired 40% of workforce because they are not needed now AI can do it without staff. There is a rumour Facebook is about to layoff 20% of workers.

There are just a lot of negative things out there at present. So many I find it hard to justify why stocks are only down 5%. And that means they can go a lot lower.

When times like these come, I ask the question – what do I think will happen sooner? A 10% fall or a 10% rise?

A 10% rise would push stocks 5% over their all time high which was at already extended valuations.

I can see a lot of reasons (as the list above) why they might fall 10% from here.

That being said, there are always places to hide. A 10% fall in the index does not mean every stock falls 10%. Some will fall more and some will fall less.

I am not saying stocks will definitely fall 10% more or that we will have a Recession. But the odds are increasing

Therefore, it could be a prudent time to think about hedges, or a bit of a portfolio rebalance where you sell some of your recent high flyers and buy Financials and Energy. You can always swap back later but this keeps you safer incase the worst comes to pass

Warning

Stock values can go down as well as up. It is possible to lose 100% of your investment in a stock. Any advice given by Capital 19 is general advice only and does not take your personal circumstances into account and might not be suitable for you.