“
”Markets in Focus
Timely analysis of market moves and sectors of opportunity
BY MATT ORTON, CFA, AND JOEY DEL GUERCIO, CFA1, 2
Maritime traffic through the Strait of Hormuz is at a near standstill with much of Iran’s retaliation to US and Israeli strikes focused on targeting oil infrastructure in the greater region.
The fundamentals underpinning this bull market remain strong, and this earnings season is not getting the credit it deserves.
We continue to believe that the market can march higher into year end, but diversification will be increasingly important to weather heightened volatility.
Equities have faced a confluence of headwinds but have been much more resilient than expected. Even before the escalation in the Middle East, markets were beginning to lean more risk off:
The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) closed off last week at around 30, its highest level since Liberation Day.
Volatility has remained relatively subdued considering all the rapid developments the markets have been forced to digest.
Tariffs are back.
Geopolitics are front and center.
And artificial intelligence (AI) has been like the grim reaper, slashing terminal values of individual companies and taking out industries one by one.
Despite correlations rising alongside volatility, dispersion is at multi-decade highs. The Magnificent Seven continues to struggle, keeping the S&P 500 Index below 7000. Last week the S&P 500 was down 2%, its worst week since October. Meanwhile — and we feel this hasn’t gotten enough attention — the 10-year U.S. Treasury yield spiked 14 basis points (bps) last week, its largest weekly rise since Liberation Day. Oil’s expeditious rise is driving up inflation expectations. This plays into yields’ ascent, but also serves to muddy the path forward for interest rate cuts — the focus for both the market narrative and President Trump.
Despite all of this, the S&P 500 is in just a -3.4% drawdown, its deepest since November. Still, the index recently fell below its 100-day moving average for the first time since just prior to Liberation Day. If we don’t see some calming in the Middle East, then selling pressure is likely to pick up. This isn’t necessarily a bad thing; pullbacks are healthy, and we’ve been waiting months for one to come. This bull market is grounded in robust fundamentals, and we continue to believe that redeploying capital into weakness will be rewarded as the year evolves.
We are in a midterm election year, which has historically been the worst year of presidential cycles for equity returns. During both of the last two midterm years, 2018 and 2022, the S&P 500 finished in the red (-6% and -19%, respectively). Both years also had meaningful intra-year drawdowns (-20% and -25%). We’re not pointing this out as something necessarily bearish, but we think that this could be playing into the market’s current weakness. Behind the geopolitics, there’s good old-fashioned domestic politics on the horizon.
President Trump’s approval rating has been dwindling for months, which should hopefully cap how long he’s willing to keep the United States involved in Iran. However, it also means that we’re probably in for a populist push, and that could affect markets. Whether it’s related to inflation and affordability, housing, or the eradication of industry “middle men,” the market is waiting for dialogue to come out of the White House. It’s no secret that the market is a scoreboard that President Trump pays attention to, and hopefully it won’t need to drop much farther before he decides to act.
The biggest overhang on the market undoubtedly stems from Iran. The longer this conflict goes on, the worse off the market is likely to be. Maritime traffic through the Strait of Hormuz is at a near standstill since the US and Israel’s initial strikes on Iran. Much of Iran’s retaliatory efforts have been focused on targeting oil infrastructure in the greater region. About 20% of global oil consumption goes through the Strait of Hormuz (but only about 3% of global natural gas consumption). Last week alone, West Texas Intermediate (WTI) crude jumped 36% for its biggest weekly jump on record since 1983. Brent crude stands at its most overbought level since the Gulf War in 1990. Oil started the week trading above $100 per barrel. It can only stay this elevated for so long before risk assets start to bear the brunt.
With President Trump reiterating his demand for Iran’s “unconditional surrender” heading into last weekend, it’s increasingly likely that this conflict drags on longer. It was announced over the weekend that Mojtaba Khameni, son of Ali Khameni, is the new supreme leader of Iran. This is obviously not the regime change that President Trump was looking for and it’s now more likely that this could drag on longer than the Trump administration initially thought.
International equities underperformed domestic equities last week by the most since Liberation Day. There was a flight to safety and the US dollar rose. Beyond US assets being broadly viewed as a safe haven, the United States also has the great privilege of being energy independent. This is not the case for a majority of emerging markets and adds important context to why South Korea’s Composite Stock Price Index (KOSPI) was down more than 10% last week. South Korea imports 100% of the oil it consumes, and oil is about 45% of the country’s final energy consumption. Taiwan also imports 100% of the oil it consumes. Most of the energy-dependent countries will continue to have a dark cloud over them the longer that oil isn’t transporting through the Strait of Hormuz.
Higher oil prices also meaningfully affects interest rates. Last week, the 2-year Treasury yield spiked around 19 bps, the most since April 2025. Because energy is a universal input price:
Inflation expectations are higher;
Uncertainty around inflation expectations are higher; and
Both lead to higher yields.
Given the labor market’s pervasive weakness, we think inflation, rather than the labor market, will be the primary determinant of where interest rates go. Higher energy costs create an environment where the US Federal Reserve (Fed) is more likely to hold rates steady for longer. Last week’s jobs report was abysmal. The February nonfarm payroll report declined by around 92,000 jobs vs. a consensus expectation of 55,000 jobs gained. Yields were quite volatile around the data, immediately declining, then spiking, and finishing a touch lower on the day. At Friday’s close, futures were implying 44 bps of cuts by year-end with the first full cut not priced in until September. The Consumer Price Index (CPI), Personal Consumption Expenditures (PCE) Price Index, and Job Openings and Labor Turnover Survey (JOLTS) all come out this week and it’s going to be very important to see how the market reacts to these numbers. The Fed has two competing mandates that we expect are likely to continue diverging over the coming months.
Midterm drawdown pull forward?
S&P 500 this year vs. typical midterm seasonality going back to 1930 (24 midterm election years)
Source: Bloomberg, as of March 6, 2026
In the near term, we think it’s important to focus on playing defense rather than offense. The S&P 500’s breach of its 100-day moving average is meaningful. The longer oil prices remain elevated, the more defensive investors should think about being. Despite this, US equities deserve credit for their resilience, exemplified by the S&P 500 closing well above intra-day lows every day last week. The fundamentals underpinning this bull market remain strong, and we believe this earnings season is not getting the credit it deserves; we expect this will eventually change. We’ve been surprised by mega-cap weakness considering that their business models are mostly insulated from energy prices, tariffs, private credit, or any of the negative market narratives.
Ultimately, we continue to believe that the market can march higher in 2026, but diversification is likely to be increasingly important to weather heightened volatility. Increased dispersion of performance means active management can shine. This is not a “set it and forget it” market anymore. Quality and safety factors could benefit as the year evolves, the anything/everything growth rally slows down, and the market becomes more discerning. Beyond the artificial intelligence, defense, and other key megatrends we’ve discussed for the past year, here are some areas where we believe dips could be buyable when it’s time to start adding risk again:
Small caps. The Russell 2000® Index is still about 700 bps ahead of the S&P 500 since Liberation Day. We believe the case for continued outperformance remains. Higher energy prices and higher interest rates are doubly negative for small caps, which is why the index has begun to draw down, but the reasons here appear to be transitory. Earnings are most likely to determine where small caps head. So far, fourth-quarter 2025 small-cap earnings growth has come in closer to 20% year over year rather than the 2% or so that the consensus had forecast. 2026 is expected to show small-cap earnings meaningfully outpace large-cap earnings growth as well, and stronger economic growth could be a tailwind for the more classically cyclical small-cap index.
International equities. The war in the Middle East has seen US equities outperform international equities, the U.S. dollar reverse its downtrend, and net oil importers fall. Many US-based investors have little to no international equity exposure and probably hesitated to buy into historic trailing outperformance. We continue to believe in the US dollar’s longer-term downtrend as well as the necessity of international equity exposure in a diversified portfolio, making this a buyable dip in international.
Gold. Remember when gold fell about 13% in three trading days? That was over a month ago. Now the shiny rock has since rallied around 11%, making a series of higher lows the whole way up. Behind the US dollar, gold remains the second-largest reserve holding and central bank appetite is only growing. Clearly, the dip a month ago was buyable in retrospect, but gold is still in a near 4% drawdown. With geopolitics in focus and havens possibly set to outperform in the near term, we believe gold exposure is a strong consideration for a well-diversified portfolio.
Earnings are basically concluded, and developments in the Middle East will certainly be the prime driver of markets next week. Inflation will be in focus with the CPI coming on Wednesday followed by the PCE on Friday. Note that the data for these reports precedes the US and Israeli strikes on Iran and are more likely to be discounted.
Tuesday also brings the National Federation of Independent Business (NFIB) Small Business Optimism Index. Friday brings the second read on fourth-quarter 2025 gross domestic product (GDP), the University of Michigan Index of Consumer Sentiment, and the Job Openings and Labor Turnover Survey (JOLTS).
1 Matt Orton, CFA, is Chief Market Strategist at Raymond James Investment Management. Joey Del Guercio, CFA, is Research Associate for Market Strategy at Raymond James Investment Management.
2 Unless otherwise indicated, all data cited is sourced from Bloomberg as of March 6, 2026.
Risk Information:
Investing involves risk, including risk of loss.
Diversification does not ensure a profit or guarantee against loss.
Disclosures:
Any forecasts, figures, opinions, or investment techniques and strategies set out are for informational purposes only. There is no assurance any estimate, forecast or projection will be realized.
Index or benchmark performance presented in this document does not reflect the deduction of advisory fees, transaction charges, or other expenses, which would reduce performance. Indexes are unmanaged. It is not possible to invest directly in an index. Any investor who attempts to mimic the performance of an index would incur fees and expenses that would reduce
return.
This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature, or other purpose in any jurisdiction, nor is it a commitment from Raymond James Investment Management or any of its affiliates to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical, and for illustration purposes only. This material does not contain sufficient information to support an investment decision, and you should not rely on it in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and make their own determinations together with their own professionals in those fields. Any forecasts, figures, opinions, or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions, and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements, and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.
The views and opinions expressed are not necessarily those of the broker/dealer or any affiliates. Nothing discussed or suggested should be construed as permission to supersede or circumvent any broker/dealer policies, procedures, rules, and guidelines.
Sector investments are companies engaged in business related to a specific sector. They are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification.
Investing in small cap stocks generally involves greater risks, and therefore, may not be appropriate for every investor. The prices of small company stocks may be subject to more volatility than those of large company stocks.
International investing presents specific risks, such as currency fluctuations, differences in financial accounting standards, and potential political and economic instability. These risks are further accentuated in emerging market countries where risks can also include possible economic dependency on revenues from particular commodities or on international aid or development assistance, currency transfer restrictions, and liquidity risks related to lower trading volumes.
Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments.
Indices
Korean Composite Stock Price Index (KOSPI) - refers to a series of indexes that track the overall Korean Stock Exchange and its components. Each of the KOSPI indexes are capitalization-weighted market averages.
S&P 500 Index — Measures changes in stock market conditions based on the average performance of 500 widely held common stocks. It is a market-weighted index calculated on a total return basis with dividend reinvested. The S&P 500 represents approximately 80% of the investable U.S. equity market.
Russell 2000® Index — Measures the performance of the 2,000 smallest companies in the Russell 3000® Index.
London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). © LSE Group 2026. FTSE Russell is a trading name of certain of the LSE Group companies. Russell® is a trade mark of the relevant LSE Group companies and is used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.
M-899161 Exp. 7/9/2026
BY MATT ORTON, CFA, AND JOEY DEL GUERCIO, CFA1, 2
The market, which was showing increased risk-off sentiment even before the U.S.-Israeli strikes against Iran, must resolve a number of contradictions to push higher.
Despite the potential for meaningful price moves, some important offsets could mitigate long-term oil price extremes.
Macroeconomic and fundamental backdrops continue to look supportive at home and abroad, making it important to focus on the bigger picture.
Current areas of focus include beneficiaries of the capital expenditure boom in artificial intelligence, select developed and emerging markets, and areas like utilities, infrastructure development, construction, mining, and aerospace and defense.
The start of this week will be driven by actions in the Middle East. The most likely impacts are a strong upward move in oil and gas prices as well as a continuation in the recent flattening of the yield curve, which was driven by the long-end rally and a stronger U.S. dollar.
However, the market was showing increased risk-off sentiment even before the joint U.S.-Israeli strikes against Iran. Much of the risk-off sentiment has resulted from inherent contradictions across the U.S. market:
Competing and incompatible narratives around artificial intelligence (AI),
A rotation beneath the surface that is not entirely supported by fundamentals, and
Potential issues in private credit despite its underlying economic fundamentals.
These contradictions must resolve for the market to push higher. The S&P 500 Index is only 1.5% below its all-time highs, but realized dispersion is extreme and sits at its highest level in more than 30 years. Positioning is becoming increasingly more defensive.
A healthy market should rally on good earnings, absorb bad news, and keep oversold conditions brief. In the current market, key sectors like information technology and financials have posted strong results and guidance while extending oversold conditions. Unease across the equity complex has spilled into interest rates, helping to push the U.S. 10-year Treasury yield below 4% despite economic data that remains robust.
We have been cautious about putting new money to work given all the contradictions in the market. We are patiently waiting for downside opportunities, noting that areas like domestic small- and mid-cap stocks, equities outside the United States, and industrials (including the AI capital expenditure beneficiaries) could be attractive if the market weakens further. Longer-term, the macroeconomic and fundamental backdrops continue to look supportive at home and abroad. This is why it’s important not to panic when geopolitics distracts from the bigger picture.
The ultimate path of oil and gas prices and the duration of dislocations highly depend on how attempts at regime change play out in Iran and whether the Strait of Hormuz is shut for a prolonged period of time.
A continued closure of Hormuz — which handles 20% to 30% of the world’s seaborne traded oil — could lead to the most significant upward pressure on energy prices. The potential for a lengthy and challenging power vacuum in Iran could also lead to meaningful price moves. However, we believe that price spikes in all of these situations are likely to be temporary, and some important offsets might prevent talk of triple-digit oil prices:
Critically, any closure of Hormuz should be fairly short-lived given the significant U.S. naval presence in the region.
OPEC+ — the Organization of the Petroleum Exporting Countries, plus 10 other oil producers — can also increase supply, and has already done so. Meanwhile, pipelines in Saudi Arabia and the United Arab Emirates can divert significant volumes around the Strait.
Nearly all Iranian oil has gone to China, which built a significant stockpile of more than 1 billion barrels. Any oil production taken offline by conflict likely will not need to be replaced in the short term.
These factors can mitigate structural price increases once the weekend’s initial price spikes start to fade. As usual, the key is how this unfolds and the duration of any disruptions.
The good news is that markets were already pricing in the increased likelihood of geopolitical escalation ahead of this week. Oil prices have been on the rise, and positioning across equities has been increasingly defensive. The Chicago Board Options Exchange (CBOE) Volatility Index (VIX) peaked last week at 22, 8 points above 1-month S&P 500 Index realized volatility.
Equity inflows have been anemic. Instead, existing allocations have shifted away from technology companies and into cyclical sectors like energy, materials, and industrials. Investors have been selling tech companies like the Magnificent Seven to fund their rotation into other parts of the market, and the lack of reaction to strong earnings reports further highlights an investor mindset focused on protecting gains rather than on buying dips. This might not limit immediate knee-jerk reactions to the escalated conflict with Iran, but it could help minimize the degree to which the market overshoots on the downside.
We also cannot lose sight of strong fourth-quarter earnings. Earnings per share (EPS) growth for S&P 500 Index companies now sits at 14.2%, almost 6% ahead of the consensus expectation of 8.3% and marking the fifth consecutive quarter of double-digit earnings growth. All 11 sectors have been reporting positive earnings growth while profit margins are at their highest level on record. Guidance has also remained positive, increasing confidence in the 2026 double-digit consensus EPS growth expectations that will be necessary to keep the market moving higher.
Valuations across S&P 500 Index companies have contracted following strong earnings results and weak price action in more expensive sectors like information technology. In fact, the S&P 500 Index’s information technology sector now has a lower 1-year forward price-to-earnings (forward P/E) ratio than its consumer staples sector. These types of inversions tend to only occur during recessions or protracted market drawdowns. Given the erratic moves in sentiment, this dislocation could get worse, but it does signal an opportunity at some point in the future.
Overall, the strong fundamentals underpinning the market should help to mitigate the duration of any drawdown driven by geopolitics or an internal positioning shakeout.
Too defensive? Consumer staples are more expensive than tech
1-year forward P/E ratios for the information technology and consumeer staples sectors of the S&P 500 Index
Source: Bloomberg, as of March 2, 2026
AI disruption and private credit concerns have been the primary drivers of dislocation and dispersion across equity markets. In the immediate future, risks related to the conflict with Iran are likely to become the market’s main pressure point, adding to the level of dispersion. Year-to-date winners like energy, already up over 24%, are likely to gain the most. Weakness across the most pressured sectors, like financials (which is down over 6%), seems likely to continue as investors assess the impact to growth. There will be a lot of noise in the coming days, and now is a time to watch and manage risk. We expect that there will be opportunities for investors once the dust settles. Here are some areas we’re thinking about:
There are still opportunities in AI. AI anxiety has fully controlled the market psyche for the past month, but it doesn’t quite fit with the fundamentals. Recent AI selloffs have felt like less of a coherent macro thesis and more of a positioning dynamic — akin to a rumor-driven bank run — where sentiment shifts can spark selling simply because others may sell. As the narrative fails to materialize, markets should revert to equilibrium. Additionally, parts of the AI trade have not been wrapped up in the capital expenditure (capex) or software shakeout. One of our key themes this year has been robotics: the growth of physical AI across defense, factory automation, and autonomous driving. We believe that this is set to be the next phase of AI commercialization, where companies across multiple sectors and industries are making investments, and where there are multiple avenues for investment exposure.
Playing defense with defense. Globally, defense has been a winning theme over the past year; geopolitical conflicts have escalated and government budgets increased meaningfully. Defense stocks surged at the start of the year, following U.S. military action in Venezuela, before trading sideways as many investors took profits ahead of earnings season. European defense companies have seen the largest decrease in positioning, and they will all be in focus this week as geopolitical fracturing comes back to center stage. Weapons stockpiles will need to be rebuilt after this conflict, and the impact of modern warfare along with the need for more drones and autonomous weapons systems is front and center.
Look down market cap on further weakness. Small- and mid-cap companies have been meaningfully surpassing the broader market this year: relative to the S&P 500 Index, the Russell 2000 Index is up 5.6% and the Russell Midcap® Index is up 6.3%. Changing private credit narratives and widening credit spreads are risks to these companies, especially given the weakness across regional banks, but we believe that the worries are likely overstated. We plan to monitor continued weakness given geopolitical tensions and the cautious investor mindset, but we still expect buying opportunities given the resilience in earnings. Increased market breadth and the strong performance of cyclical companies should be encouraging — more than 60% of the stocks in the Russell 3000 Index have outperformed the index average, which also suggests better conditions for active investment strategies.
Mind the dollar strength and emerging markets. The euro, U.S. dollar, Japanese yen, and U.K. pound are expected to increase in value due to the strikes against Iran. This, along with rising energy prices, will likely put pressure on emerging markets. Broadly speaking, emerging markets have performed meaningfully better than U.S. markets over the past year, and some markets — like South Korea — are quite extended. Many investors came into this week with extended positioning, which means that the initial impact of their risk management could be quite severe. Not all emerging markets are the same, making selectivity increasingly important for country, sector, and industry exposures. As long as we avoid worst-case scenarios (a prolonged closure of the Strait of Hormuz and a massive spike in energy prices), weakness could end up being temporary due to the strong fundamental underpinnings of markets that have enjoyed durable economic growth.
Geopolitics and the Middle East will be a key focus, but a new month means a lot of new economic data. The February U.S. jobs report on Friday will show whether hiring and wage growth are cooling fast enough to keep rate-cut expectations intact. Before that, the ADP® National Employment Report™ and surveys from the Institute for Supply Management should shape expectations.
In Europe, the European Central Bank will publish accounts of its last meeting. The U.K. Spring Statement will provide an updated economic forecast from the Office for Budget Responsibility, putting fiscal policy back in focus. And the China Purchasing Manager Index will round out the global picture.
We also expect some important earnings results this week, particularly in the consumer and software spaces.
1 Matt Orton, CFA, is Chief Market Strategist at Raymond James Investment Management. Joey Del Guercio, CFA, is Research Associate for Market Strategy at Raymond James Investment Management.
2 Unless otherwise indicated, all data cited is sourced from Bloomberg as of Feb. 27, 2026.
3 This is not a recommendation to purchase or sell the companies or investment products mentioned herein.
Risk Information:
Investing involves risk, including risk of loss.
Diversification does not ensure a profit or guarantee against loss.
Disclosures:
Any forecasts, figures, opinions, or investment techniques and strategies set out are for informational purposes only. There is no assurance any estimate, forecast or projection will be realized.
Index or benchmark performance presented in this document does not reflect the deduction of advisory fees, transaction charges, or other expenses, which would reduce performance. Indexes are unmanaged. It is not possible to invest directly in an index. Any investor who attempts to mimic the performance of an index would incur fees and expenses that would reduce
return.
This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be taken as advice or a recommendation for any specific investment product, strategy, plan feature, or other purpose in any jurisdiction, nor is it a commitment from Raymond James Investment Management or any of its affiliates to participate in any of the transactions mentioned herein. Any examples used are generic, hypothetical, and for illustration purposes only. This material does not contain sufficient information to support an investment decision, and you should not rely on it in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit, and accounting implications and make their own determinations together with their own professionals in those fields. Any forecasts, figures, opinions, or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions, and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production, but no warranty of accuracy is given and no liability in respect of any error or omission is accepted. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements, and investors may not get back the full amount invested. Both past performance and yields are not reliable indicators of current and future results.
The views and opinions expressed are not necessarily those of the broker/dealer or any affiliates. Nothing discussed or suggested should be construed as permission to supersede or circumvent any broker/dealer policies, procedures, rules, and guidelines.
Sector investments are companies engaged in business related to a specific sector. They are subject to fierce competition and their products and services may be subject to rapid obsolescence. There are additional risks associated with investing in an individual sector, including limited diversification.
Investing in small cap stocks generally involves greater risks, and therefore, may not be appropriate for every investor. The prices of small company stocks may be subject to more volatility than those of large company stocks.
International investing presents specific risks, such as currency fluctuations, differences in financial accounting standards, and potential political and economic instability. These risks are further accentuated in emerging market countries where risks can also include possible economic dependency on revenues from particular commodities or on international aid or development assistance, currency transfer restrictions, and liquidity risks related to lower trading volumes.
Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, disease, and regulatory developments.
Definitions
ADP® National Employment Report™ — A monthly report from the ADP Research Institute® in close collaboration with Moody’s Analytics. The ADP® National Employment Report™ provides a monthly snapshot of U.S. nonfarm private sector Employment based on actual transactional data.
Artificial intelligence (AI) — A technology that enables computers and machines to simulate human learning, comprehension, problem solving, decision making, creativity and autonomy.
Breadth — The relationship between the median and the mean of a market index. When a few data outliers result in a mean that is substantially larger (or smaller) than the median of the full data set, then the performance of the entire index is being driven by a “narrow” selection of companies. An index supported by “broad” market movements is one where the median is closer to the mean. Market breadth is said to be narrow when a smaller number of more extreme outliers have driven the mean of an index further from its median.
Capital expenditures / capex — Monies used by a company to buy, improve, or maintain physical assets such as real estate, facilities, technology, or equipment, and may include new projects or investments.
China Purchasing Manager Index — A report compiled by the National Bureau of Statistics of China and based on a monthly survey of purchasing managers in 31 divisions of manufacturing enterprise and 43 divisions of non-manufacturing enterprise.
Consensus expectations — Forecasts of a public company’s projected earnings, the results of a particular industry, sector, geography, asset class, or other category, or the expected findings of a macroeconomic report based on the combined estimates of analysts and other market observers that track the stock or data in question.
Credit spread — The difference in yield between a U.S. Treasury bond and another debt security with the same maturity but different credit quality. Also referred to as “bond spreads” or “default spreads,” credit spreads are measured in basis points, with a 1% difference in yield equaling a spread of 100 basis points. Credit spreads reflect the risk of the debt security being compared with the Treasury bond, which is considered to be risk-free. Higher quality securities have a lower chance of the issuer defaulting. Lower quality securities have a higher chance of the issuer defaulting.
Credit spread widening refers to the expansion of credit spreads in response to changes in economic conditions that cause an increase in credit risk.
Cyclical stocks — Stocks with prices influenced by macroeconomic changes in the economy and are known for following the economy as it cycles through expansion, peak, recession, and recovery.
Defensive investments — Investments in companies that tend to have a constant demand for their products or services, making their operations more stable during different phases of the business cycle.
Dispersion — The range of outcomes realized in different areas of a financial market.
Earnings per share / EPS — A company’s profit divided by the outstanding shares of its common stock. The resulting number serves as an indicator of a company’s profitability.
Extended is a term used to describe an investment, industry, or sector with performance that has substantially moved away from a longer-term average in a short period of time.
Forward price-to-earnings (forward P/E) — A version of the ratio of price to earnings that uses forecasted earnings for the P/E calculation. The earnings used in this ratio are an estimate and therefore are not as reliable as current or historical earnings data.
Guidance — Statements from the managers of publicly traded companies that indicate whether they expect to realize near-term profits or losses and why.
Institute for Supply Management — A nonprofit organization that produces several surveys assessing business conditions and outlooks across a variety of industries. They include the ISM Purchasing Managers’ Index (PMI), which measures the prevailing direction of economic trends in the manufacturing sector, and the Services ISM® Report on Business®, which is based on data compiled from purchasing and supply executives and reflects the change, if any, in the current month compared to the previous month in supplier deliveries along with seasonally adjusted business activity, new orders, and employment.
Macroeconomic — Relating to the branch of economics that focuses on seeking to understand the interactions between the markets, businesses, governments, and consumers that make up an entire economy.
Magnificent Seven — The seven largest stocks by market capitalization in the S&P 500 Index, as of Dec. 31, 2025. They are NVIDIA, Apple, Microsoft, Amazon.com, Alphabet, Broadcom, and Meta Platforms.
Market capitalization / market cap — The total dollar market value of a company’s outstanding shares of stock.
Organization of the Petroleum Exporting Countries (OPEC) — A permanent organization, founded in 1960 and consisting of 13 oil-exporting developing nations, that coordinates the petroleum policies of its member countries: Iran, Iraq, Kuwait, Saudi Arabia, Venezuela, Libya, the United Arab Emirates, Algeria, Nigeria, Gabon, Angola, Equatorial Guinea, and Congo.
OPEC+ — OPEC+ consists of OPEC, plus 10 other oil-producing countries (in order of production): Russia, Mexico, Kazakhstan, Oman, Azerbaijan, Malaysia, Bahrain, South Sudan, Brunei, and Sudan. OPEC+ was established in 2016 as rising U.S. shale oil production caused prices to fall dramatically.
Oversold — A security or group of securities believed to be trading at a level below its or their intrinsic or fair value.
Positioning — Assessments of whether professional investors are, on the whole, bullish or bearish on a particular security, industry, sector, market capitalization or other area of the market, as reflected by the extent to which they are invested in the area of the market in question. Directional positioning focuses on the direction of the price of an asset or group of assets.
Price-to-earnings (P/E) — A ratio that measures a company’s current share price relative to its earnings per share. The ratio is used to help assess a company’s value and is sometimes referred to as the price multiple or earnings multiple.
Realized data — Measured data for a given metric over a specified period of time.
Risk assets — Investments such as equities, commodities, high-yield bonds, real estate, and currencies, where the value may rise or fall due to fluctuating interest rates, changes in credit quality, default risks, supply and demand disruption, and other factors.
Risk-off — When sentiment is driven by a weakening growth environment, bad news that fuels a bearish outlook, and/or investor expectations of unfavorable risk/reward ratios.
Rotation — The movement of investments in securities from one industry, sector, factor, or asset class to another as market participants react to or try to anticipate the next stage of the economic cycle.
Shakeout — Occurs when investors are “shaken out” by normal price movements in the market because their fear encouraged them to sell positions at virtually any sign of bad news.
U.K. Spring Statement — An updated economic forecast from the United Kingdom’s Office for Budget Responsibility. It provides insights into growth, inflation, and borrowing.
U.S. jobs report — A monthly U.S. Bureau of Labor Statistics (BLS) report, also known as the payroll report or, officially, the Employment Situation Summary, tracking nonfarm payroll employment and the national unemployment rate.
VIX / officially the Chicago Board Options Exchange (CBOE) Volatility Index — A real-time market index that represents the market’s expectation of 30-day forward-looking volatility. Derived from the price inputs of the S&P 500 index options, it provides a measure of market risk and investors’ sentiments.
Yield curve — A line that plots yields (interest rates) of bonds having equal credit quality but differing maturity dates. The slope of the yield curve gives an idea of future interest rate changes and economic activity.
Indices
S&P 500 Index — Measures changes in stock market conditions based on the average performance of 500 widely held common stocks. It is a market-weighted index calculated on a total return basis with dividend reinvested. The S&P 500 represents approximately 80% of the investable U.S. equity market.
Russell 2000® Index — Measures the performance of the 2,000 smallest companies in the Russell 3000® Index.
Russell 3000® Index — measures the performance of the 3,000 largest U.S.-traded stocks, which represent about 96% of the total market capitalization of all U.S. incorporated equity securities.
Russell Midcap® Index — Measures the performance of the mid-cap segment of the U.S. equity universe. It includes approximately 800 of the smallest securities of the Russell 1000® Index based on a combination of their market capitalization and current index membership and represents approximately 27% of the total market capitalization of the Russell 1000® Index.
London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). © LSE Group 2026. FTSE Russell is a trading name of certain of the LSE Group companies. Russell® is a trade mark of the relevant LSE Group companies and is used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company’s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.
M-895098 Exp. 7/2/2026
