March 2026 Market Outlook: Volatility, Oil Prices, and What Investors Should Expect
- Brad Tremitiere CIO
- 2 hours ago
- 8 min read
Mid Term Ides of March
As we have mentioned many times, unusual events often occur during Mid-Term Market Years. Heading into the end of February, although index performance did not fully reflect it, we were observing exceptional strength across the broader market.
Then, early on March 1st, news broke that the United States and Israel had begun a large-scale military campaign against Iran. While this development was not entirely unexpected—given that U.S. military forces had been building up in the region over the past few months—few anticipated that action against Iran would begin as quickly as it did.
Now, one week into the conflict and after a significant increase in market volatility, the key question becomes: where do we go from here, and what can we expect for the remainder of March?
March Outlook: Enter From a Position of Strength
When the market enters a period of increased volatility—regardless of the cause—it is always preferable for it to do so from a position of strength. When market internals are as strong as they have been in 2026, disruptions are often contained and typically have limited long-term impact on the market’s overall direction.
While the current situation in the Middle East could last longer than anticipated, we do not expect a prolonged conflict similar to the Ukraine–Russia war.
Regardless of the eventual outcome, it is important to recognize that the market was exceptionally strong heading into this period. Below are two indicators that help illustrate the underlying strength within the market.
NYSE Cumulative Breadth
By now, most of our clients should be familiar with market breadth, as we discuss it nearly every month. Breadth measures the number of advancing issues on the New York Stock Exchange minus the number of declining issues, with the net value added to the previous day’s breadth total.
To better illustrate how strong breadth has been at the start of the year, we analyzed cumulative NYSE breadth for the first two months of every year since 1960. We then compared those results with the full-year performance of the S&P 500 for each of those years.
Through the end of February, cumulative NYSE breadth for 2026 reached +8,061 advancing shares, representing the 16th strongest start to a year since 1960 from a breadth perspective. Historically, when NYSE breadth has started the year this strongly, the S&P 500 has almost always posted a positive return for the year.
The table below highlights the 25 strongest cumulative breadth starts since 1960, along with the full-year S&P 500 return for each of those years. The averages are shown at the bottom of the table, along with the cumulative breadth total for 2026.
Based on this data, there has been only one year—2001—in which breadth began the year extremely strong but the S&P 500 finished the year with a negative return. In that case, the market was heavily impacted by the September 11th attacks, which represented a significant external shock.
It is important to note that we do not view the current events in the Middle East as a comparable “disaster event” from a market perspective.
Based on the historical data presented below, the strong breadth at the start of 2026 suggests the following probabilities for the S&P 500 this year:
4% chance the S&P 500 posts a negative return for the year
16% chance the S&P 500 posts a single-digit return
80% chance the S&P 500 posts a double-digit return
S&P 500 Daily Money Flow
Much like market breadth, our daily S&P 500 Positive Money Flow readings have been steadily increasing since the end of 2025. This indicator measures the number of S&P 500 stocks that close each day above their arithmetic mean price. Importantly, this does not mean the stock share price must close higher for the day; rather, the indicator helps identify accumulation as equities trade throughout the session day.
We ended 2025 with 258 S&P 500 stocks posting positive daily money flow, meaning roughly 51.5% of index constituents were showing positive money flow. By the end of February, that number had risen to 313 stocks, representing an increase of approximately 21%.
More notably, since the conflict in the Middle East began last week, the number of S&P 500 stocks with positive money flow has continued to rise, reaching 343 stocks as of the close on March 6th. In other words, while volatility dominated market headlines last week, the number of stocks closing above their average price throughout the day actually increased significantly.
This provides strong evidence that investors are buying into market weakness, particularly the declines that often occur overnight in the futures market. On a broader level, this dynamic can be observed by comparing the S&P 500’s overnight performance (close to open) with its intraday performance (open to close).
During the first week of March, the S&P 500 lost roughly 200 points overnight, yet gained 62 points during regular trading hours. This suggests that meaningful buying pressure is occurring during the day, even if the market ultimately closes lower. Over time, this type of underlying strength often begins to outweigh short-term volatility.
As another example, the S&P 500 ETF (SPY) recorded a new all-time high in Daily Money Flow as of the market close on March 9, 2026. It is historically difficult for the broader market to remain weak when money flows into SPY are reaching new all-time highs.
This positive divergence between SPY’s money flow and its price action reflects consistent accumulation throughout the trading day, as investors continue to buy the ETF despite short-term volatility.
It’s All About Oil
Much of the market weakness we have seen since the beginning of the month can be attributed to the rapid rise in oil prices following the outbreak of fighting in the Middle East. After closing at $67.02 per barrel on February 27th, oil prices surged to a high of $119.48, before settling back into the $95 range.
While the market can absorb higher oil prices, the speed at which oil and oil futures have risen tends to create market dislocations and increase overall volatility. The primary concern is that higher oil prices could reignite inflation pressures, similar to what occurred in 2022 during the early stages of the Ukraine–Russia conflict.
One key difference compared to 2022 is the current stance of the Federal Reserve. At that time, the Fed was significantly behind the curve and rapidly tightening policy through aggressive rate hikes. Today, the Fed is in a far more flexible position and is expected to remain relatively accommodative moving forward.
Oil Futures and Backwardation
As we saw with oil in 2022, the fact that oil futures have entered a period of severe backwardation suggests that prices may struggle to remain at these elevated levels.
Backwardation occurs when the current price of a commodity is higher than the prices of its future contracts. Most commodities typically trade in contango, a condition in which the current price is lower than future contract prices.
When a large spread develops between a commodity’s current price and its future contract prices, it often signals that traders do not expect the current spike in prices to persist. Historically, significant backwardation spreads have often coincided with price peaks in commodities.
Over the weekend of March 7–8, the April 2026 crude oil futures contract spiked to a high of $119.45, while the April 2027 contract was trading at $68.95. This created a massive spread of $50.50, the largest since the early days of the Ukraine–Russia conflict, and a spread that appeared unsustainable.
By the close of trading on March 9th, oil prices had fallen sharply and the spread between these two contracts had narrowed significantly to $21.20.
Unless there is a major escalation in the current conflict, we expect oil prices to remain elevated in the near term but gradually decline toward levels seen before the conflict began.
Today vs. 2022
Many clients are concerned that the current geopolitical environment and spike in oil prices could lead to market weakness similar to what we experienced in 2022, when the Ukraine–Russia conflict significantly disrupted global markets.
However, we see five key differences that support our view that the current situation is unlikely to produce the same market conditions seen in 2022.
1. Post-Stimulus Economic Adjustment (2022)
In 2022, the U.S. economy was emerging from one of the most accommodative monetary policy environments in history. Massive fiscal and monetary stimulus during 2020 and 2021 significantly distorted consumer spending patterns. As a result, 2022 represented a normalization period as excess savings were gradually depleted.
2. Federal Reserve Policy Direction
In 2022, the Federal Reserve was rapidly ending its quantitative easing program and beginning one of the most aggressive tightening cycles in history. The Fed raised rates seven times, increasing the federal funds rate from 0.00% to approximately 4.50% by the end of the year.
Today, the situation is very different. Looking ahead into 2025 and beyond, the Fed is expected to move toward lower rates and a more accommodative stance.
3. Global Oil Supply Conditions
Due to the supply disruptions caused by COVID shutdowns, the global oil market operated in a deficit during both 2020 and 2021.
Since then, supply conditions have improved significantly. The global oil market has recorded a surplus in three of the past four years, with 2025 representing one of the largest oil surpluses on record.
4. Inflation Trends
Inflation began accelerating in mid-2021 and reached multi-decade highs during 2022. Today, while inflation remains somewhat sticky, the overall trend has been gradually declining. Any temporary inflation pressure caused by rising oil prices is likely to be partially offset by continued cooling in housing-related inflation.
5. Nature of the Conflict
The geopolitical dynamics also differ significantly. The current conflict involving Iran is directly tied to U.S. strategic actions, unlike the Ukraine–Russia conflict, which involved external actors with limited direct U.S. control. Because of this, there may be greater potential for de-escalation, which would likely be a positive development for financial markets.
What March Will Bring
While March has begun on somewhat shaky footing, there is a strong seasonal pattern in the market that should allow prices to repair some of the damage that has occurred. Historically, following an early March low, S&P 500 seasonality suggests the market can gradually grind higher toward an important mid-term peak near the end of April.
Of course, any escalation in the Middle East could put additional pressure on the S&P 500 and disrupt this seasonal trend. However, we believe continued de-escalation in the conflict will likely help relieve pressure on oil prices and reduce some of the volatility currently affecting the market.
Considering the strong liquidity we are seeing in the market—reflected in our S&P 500 Positive Money Flow indicator and the exceptional breadth recorded on the NYSE year-to-date—the downside risk for equities should remain relatively limited. As a result, we expect price action to gradually resume its upward trend.
With most major earnings reports now behind us, the Federal Reserve meeting on March 18th will likely be the most important market event for the remainder of the month, aside from developments related to the Iran conflict. While we do not expect the Fed to cut rates at this meeting, it will be important that the committee maintains a dovish stance, reinforcing expectations for at least two additional rate cuts in 2026.
For the remainder of the March 2026 market outlook, unless the conflict in the Middle East escalates significantly or the Federal Reserve unexpectedly shifts to a more hawkish tone, we believe the market should be able to repair the damage seen over the past week and continue moving higher toward the seasonal mid-term peak expected in late April.
Ranch Capital Advisors
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