As NCAA March Madness gets underway, investors are facing some unwelcome “market madness.” As of the writing of this post, the S&P 500 is at its lowest level since November 2025, oil prices are rising, and interest rates are also trending higher as hopes of a rate cut and low inflation fade.

What happened this week to spark this “madness”?

The largest driver of market volatility remains the ongoing conflict in Iran. Until there is a resolution for this situation, energy prices will remain in flux and markets will remain on edge. Early on in the conflict, comforting rhetoric from the Administration could seemingly calm markets but that is no longer working. Energy flows and pricing are in control now – and it’s leading to a lot of jumpiness.

In addition to that backdrop, we had two major market events this week that brought back an old market worry – inflation.

The first was the release of the Producer Price Index (measure of wholesale inflation). Unfortunately, that reading came in well above expectations (up 0.70% versus 0.30% expected). Even with taking out food and energy, core PPI was also above expectations. This report seems to finally have contradicted the narrative that tariffs had no impact on prices. The biggest driver was core goods which is also troubling as that either means consumer prices need to increase or margins need to decline – neither of which are positives for the economy. High inflation is not good news for markets as it likely results in no or slow rate cuts – which works against both bond and equity prices.

The second main event was the March Federal Reserve meeting. As was highly anticipated, the Fed left rates steady. Their projections still included one rate cut for 2026 but the commentary was concerning to markets (equities fell and rates rose in response to the press conference). For the past several meetings, jobs/labor market have been the “problem child” of the dual mandate, with the risks being tilted to the downside (ie: weakening labor market lent support to a rate cut). That all changed in this week’s meeting, as the focus is now back on inflation where the risk is to the upside (higher inflation is the risk, which calls for steady – or higher – rates to slow spending).

Powell seemed a bit confused as to why inflation remains sticky (even before the Iran conflict), stating “there is also just the feeling that we haven’t seen the progress that we hoped for on core goods” and stating that it is looking as though the impact of tariffs is finally visible. Powell also did not agree with the past practice of simply “looking thru” shocks in energy prices from global conflicts, noting instead that the Fed would monitor the impacts and evaluate along with other data in coming months.

The Fed’s commentary, which also discussed the potential impacts on prices if the Iran conflict continues, made markets skeptical that rate cuts will come anytime soon and as a result, bond yields rose and equity prices fell. The Fed will remain data dependent (even under the leadership of future chair Kevin Warsh once he is approved) so if the data changes, they will change course as well. It’s just challenging to know when that will occur.

Weeks like this are frustrating for investors. It seems as though bad news just keeps on multiplying and it can become very discouraging. Keep in mind that trend lines reverse – even the downward sloping ones. Now is not the time to abandon your plan. Yes, you’ve given up a bit of returns from prior years but you are likely still in a far better position than you were the day you began investing. Don’t let a few bumpy weeks distract you from the decades-long journey.

Onward we go,