The Week in Charts (3/3/26)

View the video of this post here.

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The most important charts and themes in markets and investing…

1) A Stunning Rotation

The sector rotation so far this year has been absolutely stunning.

Energy is up over 27% and Materials has gained 17% while Tech (-3%), Consumer Discretionary (-3%), and Financials (-6%) are all down on the year.

Propelling the move in Energy has been the gains in Crude Oil (+24% YTD) and Gasoline (+38% YTD), which were rising well in advance of the US strikes on Iran.

The sector dispersion is driving a rotation from Growth to Value this year as Growth is overweight Tech and value is overweight Energy, Materials, and Staples.

Within growth, weakness among the former leaders is notable. All 7 members of the Magnificent Seven are currently down on the year and underperforming the S&P 500.

2) The World Strikes Back

International stocks have outperformed US stocks by 27% over the last 14 months, the biggest 14-month spread we’ve seen since 1993-94.

Here’s a look at global equity returns since the start of 2025…

3) Trouble in Credit

Leveraged Loans ($BKLN ETF) ended February down over 3% from their January high. While not a huge decline, this type of weakness has typically coincided with a much bigger stock market correction (S&P 500 ended February only 1% off its high).

The $BKLN ETF is overweight software names (18% of the fund) which have seen credit spreads widen in recent weeks, coinciding with the big sell-off in software stocks (see $IGV ETF down over 30% from its peak).

A number of publicly traded companies that are large investors within the private credit space have seen significant drawdowns, with Blue Owl (-59%) being hit the hardest after news that it was limiting redemptions in some of its funds.

4) The Long Road Back to Even

The US Bond market has now been a drawdown for 67 months, by far the longest in history.

But the long road back to even is nearly over, with the Bloomberg Agg Index only 0.3% below its 2020 high.

With current yields around 4%, that should be the base case expectation for long-term (7-year) bond returns. While the short run is entirely dictated by changes in interest rates, the starting yield is all that really matters in the long run.

5) A Divided Fed

The FOMC minutes from January revealed a divided Fed, with some members saying that further rate cuts would likely be warranted, others saying it’s appropriate to hold rates steady, and others still arguing that rate hikes should be considered if inflation remains “at above-target levels.”

What is the Fed’s inflation target? 2%.

And has the Fed achieved that target?

By any objective measure, the answer has to be no.

• Consumer Prices in the US have risen 4.5% per year over the last 5 years and over 24% in total.

• Producer Prices in the US have risen 4.6% per year over the last 5 years and over 25% in total.

• The Fed’s preferred measure of inflation (Core PCE) moved up to 3.0% in December. That was the 58th consecutive reading above the Fed’s 2% target level.

When the Fed meets again in 2 weeks (March 18), the divisions will be more evident than they’ve been in a long time. But for now, those arguing for holding rates steady (at 3.50-3.75%) seem to be in the majority, and the market is pricing in almost no chance of a rate cut (<3% probability).

6) More Tariff Confusion

In a 6-3 decision, the US Supreme Court ruled that most of President Trump’s broad global tariffs were unlawful because he lacked the authority under the International Emergency Economic Powers Act (IEEPA).

The justices emphasized that the power to tax, including tariffs, resides exclusively with Congress, and IEEPA does not empower the president to levy broad import duties.

While the ruling reinforced constitutional limits on executive power in trade policy, we’re still left with many more questions than answers in terms of what happens next, including:

• What will happen to the tariff money collected over the past year?

Much of it may have to be refunded as at least 2,000 companies are already suing the federal government.

• What will happen to effective tariff rates going forward?

They may not change much overall in the short run because President Trump quickly announced a 10% global tariff under a different statute (Section 122 of the Trade Act of 1974), with plans to increase this to the maximum allowable 15%.

• Will the Section 122 tariffs be challenged in court?

That seems likely. They automatically expire after 150 days unless Congress acts, and opponents might challenge the continuation or extension beyond that period.

• What will all of this mean for the trade deficit?

That’s still not clear.

The trade deficit in goods actually hit another record high in 2025, widening by 2% over 2024’s record levels.

There are several reasons for this:

a) Massive front-running of imports in January-March 2025 before the higher tariffs were implemented.

b) The US is still running large federal budget deficits = higher government spending = more consumption/investment = more imports.

c) Substitution: imports were rerouted from higher tariff countries like China to Vietnam/Mexico/India because it was still cheaper to buy from those countries than move manufacturing capabilities to America. Also, high uncertainty over future tariff rates makes it difficult for companies to plan years in advance and make a huge investment in US manufacturing.

d) Inelastic demand for many goods: there’s no immediate domestic substitute for many goods, so tariffs will simply raise prices of these goods rather than reduce volumes.

e) Inflation: the trade deficit is measured in dollars. If tariffs raise the price of imported goods, the nominal value of imports will increase, even if volumes don’t Higher import prices = bigger deficits.

• What will this mean for economic growth and inflation?

That’s also not clear.

US Real GDP ended 2025 up 2.2%, far short of the many bold predictions that we would see 5% growth.

Due to the massive front-running of tariffs in 2025 and the high uncertainty over rates going forward, it will likely take more time for higher prices to continue to flow through to the end consumer.

7) A Few Interesting Stats…

a) The personal savings rate in the US averaged 4.5% in 2025. History since 1959…

b) A record 32% of household wealth is now held by Americans that are 70 years of age and older.

c) Self-driving taxi company Waymo is now doing over 1.2 million rides per month in California, a 22x increase over the past two years.

d) In the first 4 months of the 2026 Fiscal Year the Federal Government took in $1.8 trillion and spent $2.5 trillion. Don’t try this at home.

e) 12.7% of credit card balances in the US are now 90+ days delinquent, the highest since 2011. 5.2% of auto loan balances are now 90+ days delinquent, the highest since 2010.

And that’s it for this week. Thanks for reading!

Every week I do a video breaking down the most important charts and themes in markets and investing. Subscribe to our YouTube channel HERE for the latest content.

Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. Read our full disclosures here.

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