HOW I SEE IT – by Bruce

Volatility & War/Global Outlook-2026/Policy Support

Equity markets continue to be volatile - mainly due to Iran War – the uncertainty. The best strategy historically is to wait it out and hopefully it’s a short period of time.

Positives. AAII Investment Sentiment Survey - 33.1% bullish/ 31.4% neutral/ 35.5% bearish - steady reading from last week - I expected it to be more bearish.

RBC WM - Pulse of the Market - S&P 500 price target of 7750 driven by 13% consensus EPS growth rather than P/E expansion. February derisking driven by multiple converging concerns: geopolitical tensions (Iran), underwhelming earnings, private credit worries, AI job lost fears (despite weak evidence), and weakness in Bitcoin. Valuations remain stubbornly elevated, limiting upside S&P 500 forward P/E of 25.5 times sitting well above the 18.5 times historical average. RBC expects at least one garden variety pull back to 6260 - 600 range this year, deeper growth scares scenarios (14-20%) possible if private credit or recession fears escalate, but base case supports continued upside.

RBC GAM. Global Investment Outlook - Spring 2026 -released - Key conclusions. Middle East war winds range of potential outcomes for the economy and markets while domestic activity is supported by surge and AI related Capex. Maintaining slight overweight in stocks with strong preference for non-US regions further gains will be highly dependent on strong earnings growth and elevated investor confidence being sustained. Global Purchasing Managers Indices - after just over 3 years of sluggish readings, leading economic indicators have turned higher and suggest that growth may be accelerating. In our base case scenario, the Middle East conflict has limited impact on broader economic growth, inflation pressures subside later in 2026, allowing the Fed to resume interest rate cuts.

Charts - Money market on the sidelines - $ 7.8 trillion in money market funds - sitting at ATHs - and building.

Charts – Goldman - thinks Hormuz will restart soon.

Charts - Bank of America - our base case is that the US-Israel military operation in Iran will not result in a particularly protracted conflict - limiting upside to oil to $10-$15 per barrel. In this context, the impact on US growth and inflation would likely be contained.

Goldman - Equities vulnerable to correction but not a bear market. Broad market rotation underway.

Ned Davis Research - On average European equities were higher in the sixth and 12 months that followed the start of a conflict.

Fidelity - With Middle East headlines still evolving - the focus stays on what markets are pricing and how portfolio structure is behaving. The goal - use stable anchors - like earnings, breath, rates correlations - to navigate the noise. Global equities are near all-time highs supported by global earning strength. International equity out performance is being driven by - better earnings growth, competitive payout ratios, lower evaluations. The US valuation premium versus international equities has compressed from 68 to 41%. The broader market appears better grounded across price trend breath earnings & valuation. What’s constructive - Global and US equity trends remain attacked. Earnings are driving returns more than evaluation expansion. The broader market equal weight is healthier than the headline index implies. International equity support is fundamental.

Jim Paulsen – “Technology is the tail wagging the dog and the rest is a recession by any other name. US real private GDP rose by 2.3% in 2025. But excluding the new era investment the other 89% of the real private spending rose by 1% with no job creation. The larger old area economy is in a recession.  A challenge facing the US is not a K shaped split between the rich and the poor. Rather, it’s a new era versus old era problem which has become so pronounced that it has left real growth in 89% of the economy nearly flatlined. The US needs to stop obsessing over potential inflation risk and over large deficits and get to work supporting the 89% of the economy which needs help to coexist with the 11% comprising the new era. A leadership toggle? Is policy accommodation finally bringing a leadership shift. My guess is we are amid a significant shifted leadership from newer stocks towards broader market plays, which may strengthen throughout this year. Should economic data remain disappointing, as I suspect recession fears are likely to intensify. While this could cause some stock market turbulence along the way wall of worry, it will also accelerate policy support.”

Dr. Ed Yardeni - Purchasing Manager’s Survey of Business activity - Manufacturing PMI - stabilized in February -suggest that factory activity is finally improving - this aligns with the latest Fed Beige Book - increase in new orders and employment levels were generally stable. Purchasing Managers’ survey of prices, both price paid indices remain well below the extreme levels reached during the pandemic. ADP employment reported that private payroll increased beating expectations. Job growth has been driven by small business. Bank Loans -lending standards since 2023 have eased and continue to expand. Software stock prices - appear to have found technical support.

Tom Lee - There is good data this week. The ISM services came out and it was a good number with softer inflation. The jobs report came out, it was the best jobs number. I’m going to conclude by saying I think March is likely an up month even though there is the Iran war. We stick with our trades - energy and basic materials as our top picks -plus industrials, financials and small cap - will continue to buy the dip.

Negatives. Goldman - Elevated near term risk from rising geopolitical uncertainty in Iran - AI disruption concerns - compounded by historically high valuations

Charts. Goldman. Technology. The trend of US under performance accelerated at the start of this year with the US experiencing its poorest relative start to any year pre-the conflict in the Middle East since the mid-1990s. Reset anxiety about tech valuations, capex plans and the disruption to business models, particularly in the areas around software, has resulted in a derating of long duration cash flows in favor of more certain near term returns in physical capex and infrastructure.

Ned Davis Research - Most likely initial impact now from war is inflationary from higher oil prices. Despite US tariff supply chain, pressures have been relatively muted. This war could lead to more supply chain upheaval - another upward risk to inflation.

Fidelity - The mag 7 trading range is the main market fault line. Inflation falling to justify a very dovish forward yield curve. A correction becomes more likely if mega cap support breaks.

Brian Westbury – The Great Reset - Today the market is overvalued. History may rhyme, but it doesn’t repeat. War is uncertain, and while the US and Israel are dominating investors would be foolish to assume they know every twist and turn to come even here at home where the threat exists. If there is a common theme running through the actions of the US in the past year, it is fighting back against the institutions, governments and entities which want to undermine capitalism. That would be a great reset.

Investment strategy - Planning. “Planning is a process of choosing among those many options. If we do not choose to plan, then we choose to have others plan for us.” Richard Winwood

Stock of the Days: UBER, RBC14692, MA, BRK.B, BX

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