Titan Wealth International Weekly Investment Update

Investors had few places to hide as volatility rose, international markets declined sharply, and questions emerged about the path of interest rates and economic growth.

What Drove Markets Lower

Middle Eastern conflict, rising oil prices, and a disappointing monthly jobs report weighed on stocks, with US indexes falling for the second week in a row. The Dow finished down 2.9%, the S&P 500 retreated 2.0%, and the Nasdaq ended 1.2% lower.

International markets fared considerably worse, with the MSCI EAFE Index and the MSCI Emerging Markets Index both down nearly 7% for the week. European markets were hit hardest, with major indexes in Germany, France, and Italy each dropping between 6% and 9%.

The Cboe Volatility Index — which tracks investors’ expectations of short-term market volatility — climbed to the highest level since last spring’s tariff-related surge, closing at 29.5, up 48% from the prior week.

The Oil Shock

The dominant story of the week was energy. Escalating military conflict rippled throughout the Middle East, pushing oil prices to the highest levels since September 2023.

With oil shipments in the Persian Gulf’s Strait of Hormuz sharply curtailed, US crude was trading around $91 per barrel — up from $67 just a week earlier. That is a staggering 36% move in a single week.

Oil price shocks have in the past proved dangerous for economies and markets, with crises in the 1970s and in 1990 serving as prominent examples where Middle East tensions sparked oil price spikes accompanied by recessions.

However, the relationship between the US economy and oil prices has evolved significantly since then, given the substantial growth in domestic energy production.

With oil trading around $90 per barrel, recession probability models point to a moderate 15% chance of a near-term downturn — elevated, but far from the economy-ending scenario that some headlines might suggest.

A Troubling Jobs Report

February’s net loss of 92,000 jobs came as a surprise to most economists, who had forecast a gain of around 50,000. The setback marked the third monthly jobs decline over the past five months, with initial figures for December and January revised downward by a combined 69,000.

The weaker report could complicate decision-making for the Federal Reserve, as policymakers balance signs of labor market cooling against potential inflation pressures from rising energy prices.

Normally, a weak payroll report would bolster expectations for Fed rate cuts, providing some comfort for equity investors.

However, the oil price spike complicates matters, as investors appear to question the willingness of the Fed to ease in the face of renewed inflation risks. Markets now expect any rate cuts to be delayed, potentially into late 2026 or 2027.

A Silver Lining: Corporate Earnings Remain Resilient

Amidst the noise, it is worth pausing on one encouraging data point from the recently concluded fourth-quarter earnings season.

Companies in the S&P 500 posted an average earnings gain of 14.0% over the same quarter a year earlier — the fifth consecutive quarter of double-digit growth. Information technology led all sectors with a 33.0% earnings gain. The underlying corporate profit engine remains intact, and that matters enormously for long-term investors.

Global Perspective

The escalation has centered market attention on two key uncertainties: the duration of the conflict, and the risk of disruption to oil flows through the Strait of Hormuz.

Even without a full closure, heightened tensions can increase shipping and insurance costs and embed a geopolitical premium into energy prices.

Countries that are net energy importers — particularly in Asia and Central and Eastern Europe — experienced currency weakness and higher bond yields as investors priced in the potential for higher inflation.

In Europe, traders’ expectations for monetary policy shifted dramatically, with the probability of the European Central Bank raising rates increasing to more than 50%.

What We Are Watching

There are few near-term signals of a step-down in the conflict in Iran, with President Trump indicating that the US will not negotiate until it receives an unconditional surrender.

This suggests volatility is likely to remain elevated in the weeks ahead. On the economic data front, CPI and PCE inflation reports due this coming week could offer some clarity about inflation trends after recently divergent results, with the most recent CPI showing a 2.4% annual rate while the PCE measure showed 2.9%.

The Bigger Picture: Stay the Course

We remain constructive on the longer-term outlook. Corporate profitability has been rising and broadening, tax cuts are filtering through the economy, and AI investment remains a tailwind with tentative signs that it is starting to lift productivity growth.

Geopolitical shocks of this nature are deeply unsettling in the moment, but history is consistent in showing that they tend to be more short-lived in their market impact than they feel at the time.

For longer-term investors, staying invested through disruptions has typically proved the best strategy, and we believe that will be the case here.

Recent volatility could even be an opportunity to invest in areas where you are underexposed or to rebalance portfolios at cheaper valuations.