Beware the Ides of March

On March 15^th, 2,069 years ago, a group of Roman senators assassinated Julius Caesar by stabbing him more than 20 times. The moment is famously depicted in William Shakespeare’s “The Tragedy of Julius Caesar.” In the play, Caesar encounters a fortune teller who warns him to “beware the ides of March” (“ides” was the Roman term for the 15^th day of a normal month), advice that Caesar ignores. The actual assassination was a culmination of three events, according to Roman historian Livy. First, Caesar failed to stand when greeting senators, a snub indicating that Caesar no longer respected the Senate. Second, Caesar removed two representatives of the lower Roman class from Senate membership, believing they were attempting to create opposition to his growing power. Finally, at a festival, one of Caesar’s supporters placed a crown on his head, which Caesar made a grand display of refusing after the crowd fell silent. Many in the crowd believed that this was Caesar’s way of testing the waters of public opinion for his ascension to king of Rome. In just a few months Caesar had disrespected powerful senators, removed the people’s representatives in the Senate and tested the idea of monarchy. In hindsight it’s no surprise that Caesar would become a target for those who felt he was a threat to the Roman republic. Other than literal daggers in the back, the downfall of Caesar was his ego, which caused him to ignore signs that his former supporters were beginning to turn on him.

In an environment where markets have felt as jittery as the Roman Senate on the Ides of March, the parallels to Caesar’s assassination are hard to ignore. While Caesar’s assassination was preempted by three specific events, today’s environment features a multitude of factors that have led to a feeling of unease. Investors are navigating mixed economic data, rapidly shifting markets and more recently, a volatile geopolitical climate where one tweet or press conference can send commodity prices soaring. While Caesar ignored the warning to beware the ides, investors have been much more cautious, remaining on the lookout for the next dagger that could trigger a selloff.

Despite recent volatility, markets remain within 5% of all-time highs. One of the explanations for the market’s continued strength is that both economic growth and corporate profits have remained solidly positive for the last three years and are still on solid footing. However, a new potential dagger has emerged as shipping traffic in the Strait of Hormuz remains at a standstill. Since the United States and Israel struck Iran just over two weeks ago, the price of crude oil has surged from $65/barrel to as high as $100/barrel. Approximately 20% of global crude shipments flow through the Strait of Hormuz, and the uncertain timeline of the conflict, and in turn, when the Strait will reopen, has increased the likelihood of an economic downturn.

Surging oil prices have historically increased risk around inflation, economic activity and monetary policy. Specifically, a spike in energy costs can often lead to an increase in inflation, which often turns into a pullback in economic growth, especially when paired with geopolitical uncertainty. A rise in energy prices paired with Federal Reserve (Fed) policy tightening has accompanied nearly every recession since World War II. While we already have rising energy prices, the Fed’s current stance remains uncertain. There are arguments for and against the Fed tightening policy, and while the Trump administration has pushed for interest rate cuts, many other factors—stable economic growth, a resilient job market, sticky inflation—have made that wish less likely to come true.

As you might have guessed, markets finished lower last week with the S&P 500 (S&P) losing 1.6%. The weekly loss marked the eighth negative week in the first 11 weeks of the year, marking one of the weakest starts to the year for the S&P since WWII. According to research from Bespoke Investment Group, this is just the eighth time since 1945 that the S&P has experienced three or fewer positive weeks to start the year. While we are off to a slow and uncertain start this year, markets also got off to a slow start in 2025 before ending the year with a double-digit gain—so not all hope is lost.

While the conflict between the United States and Iran and the situation in the Strait of Hormuz drove much of the market’s action last week, a normal slate of economic data and corporate news still made their influence felt. Markets closed higher on Monday, reversing sharp losses at the open after President Trump made comments indicating that the conflict with Iran could conclude sooner than expected. Crude oil briefly reached $120/barrel over the weekend but fell below $90/barrel following his comments. While stocks in the energy sector have been significant beneficiaries of the rise in oil prices, they gave back some of their gains on Monday. Oil prices continued to stabilize on Tuesday, finishing the day just below $90/barrel. A light day for economic news paired with energy price stability meant markets finished little changed.

Wednesday brought a more mixed finish as small-cap and value stocks underperformed while the NASDAQ Composite was the lone major domestic index to finish in positive territory. On Wednesday the International Energy Agency announced a release of 400 million barrels of oil reserves—the largest in its history—in an attempt to stabilize prices. The drastic action came as the situation in the Strait of Hormuz appeared to worsen with reports that Iran attacked six civilian ships. The uncertainty has prompted oil producers in the region to scale back production, a move that could have longer-term implications for global energy prices. Also on Wednesday, February’s Consumer Price Index (CPI) report showed that headline prices increased 2.4% from a year ago. Core CPI, which removes the impact of food and energy prices, rose 2.5%. It should be noted that the impact of surging energy prices wasn’t captured in this data. We expect inflationary pressures to reignite in the coming months as input costs rise and are passed on to consumers.

Oil prices rose once again on Thursday with crude reaching $95/barrel. Conflicting statements from U.S. government officials on the approach to and expected outcome of the conflict weighed on investor sentiment and pushed stocks lower. Markets couldn’t reverse course on Friday and closed lower amid signs that the conflict in Iran would escalate further. While the situation in Iran got worse, so did the second estimate of fourth-quarter U.S. gross domestic product (GDP) growth. The updated data showed that GDP grew just 0.7% last quarter, half of initial estimates. The weakness stemmed from lower consumer spending activity and a pullback in business investment. Many economists were quick to point out that the data was likely impacted by the government shutdown during the fourth quarter, and a more normalized look at the data still reflects stable growth. Friday also saw the release of the Fed’s preferred measure of inflation. January’s Personal Consumption Expenditures (PCE) Price Index indicated that inflationary pressures persisted, with the headline number indicating a 2.8% increase in prices from a year ago, well above the Fed’s long-term target of 2.0%. When we consider the potential impact of higher energy prices on future readings of PCE, we remain skeptical that the Fed will cut rates any time soon.

Looking ahead to this week, the conflict in Iran and the situation in the Strait of Hormuz will likely dominate headlines and move markets. We don’t anticipate a resolution any time soon, but any hint of a ceasefire or deal could support markets. In economic news, investors will look for any changes in the Fed’s posture toward monetary policy as a result of the conflict in Wednesday’s Fed interest rate decision and accompanying press conference.

Links to previously published commentaries can be found at benjaminfedwards.com/Latest Investment Insights/Market Commentary/Market.