March Market Commentary

A view of the markets in March 2026. Commentary provided by Sugatu Capital, a trading name of AmberHill LLP, Thornbridge Appointed Representative.

If 2025 was defined by markets climbing a “wall of worry,” Q1 2026 was the moment that wall finally caught up with the narrative. Following a stellar 2025, the first quarter of the new year served as a sobering reality check. The momentum that propelled risk assets through December hit a significant speed bump, driven by a combination of geopolitical shocks and a fundamental repricing of the AI trade.

As of the end of Q1 2026, the S&P 500 declined by 4.4% and MSCI World declined by 2.2%, marking its most challenging start to a year since the 2022 bear market. This pullback was largely characterized by a rotation away from mega-cap growth and toward value and real assets. Two primary themes dictated this shift:

1. The Energy Shock and Geopolitical Strain

The defining event of the quarter was the escalation of conflict in the Middle East, which directly impacted energy infrastructure and led to the effective closure of the Strait of Hormuz. This sent shockwaves through the commodity markets:

• The Bloomberg Commodity Index surged 23.3% for the quarter.
• Energy prices rallied sharply, reigniting fears of sticky inflation just as the market expected the Fed to continue its easing cycle.

2. The SaaSpocalypse

• SaaS Disruption: Investors grew increasingly concerned that generative AI might cannibalize the traditional Software-as-a-Service business model rather than enhance it. This led to a sharp (20-40%) correction in many SaaS names between January and late February.
• Capex Scrutiny: Markets began skeptical of hyperscalers’ continued massive AI spending without showing a clear path to significant ROI.

The Federal Reserve has shifted to a defensive stance in response to stubborn inflation, amplified by the recent surge in energy costs, despite concluding 2025 with a more dovish outlook. Consequently, the initial forecast of three rate cuts for the year now appears highly improbable only one quarter in.

As the United States contends with a reset in technology valuations and the complexities of a midterm election cycle, our strategy remains focused on pinpointing opportunities where a significant discrepancy exists between market price and intrinsic value.

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